The current real estate market fluctuates based on supply and demand, interest rates, general economic conditions, and other factors. The same house may sell for more or less under a different economy. Home values have skyrocketed over the last couple of months. Rising home values are an effect of low inventory, meaning there are fewer homes on the market than there are potential buyers looking for homes.  This is good news for sellers because they are receiving more offers than normal, which presents the opportunity to create a bidding war and drive the prices up. The question is, with prices this high why are buyers still buying?

              It can be difficult to predict why and how the real estate market changes. Fortunately, there are trends that we research to better understand the market. One trend is of would-be-sellers deciding to hold onto their homes and lease instead of selling. Also, as values have risen across the state, potential sellers that could have utilized prop 13 to keep their tax base low now would have to potentially purchase a home with much higher taxes. Unless the seller is 55 years of age they could not utilize the onetime tax base transfer; even if they were over 55 there are only 11 eligible counties in California they could move to. Without the ability to transfer tax base to many other county’s or if a seller already has transferred there is a decrease in homes being sold, thus adding to the low inventory. The California Association of Realtors is putting together an initiative to make transferring tax base easier.

 

              Another reason that home values have risen is due to an abundance of buyers and high quality of offers being received. Many millennials are starting to move toward home ownership as motivated first-time buyers or even second purchasers. Additionally, many foreign investors are coming with ALL-CASH offers, which are very attractive to sellers in this competitive market as they can do a fast close of escrow and not have to worry about an appraisal. These two factors play a large part in why home values are continually on the rise. The buyers are buying because homeownership, though high in price right now, is a great investment long term. If you look at the market over a long period of time, say 50 years, values have gone up 3.5 – 4.5% every year.

 

              The trend of low inventory and high prices does not seem to be ending anytime soon. Whether you are thinking of selling or buying there are many factors in getting what you want. If its being the best offer without over paying for a home or negotiating the sale of your home to make sure that no money is left on the table, experienced professionals are helping people save tens of thousands of dollars.