What’s Happening?

When January 1st came, it was like someone flipped a switch. Californians, among others, began moving here in droves and/or bringing their investment funds, if nothing else. Now, in many areas of town, homes are going for 10-30% over list price almost completely across the board, without exception. What’s made matters worse, in most cases buyers are waiving appraisals. This means that when the bidding is wildly over the current comps, the loan won’t always cover that amount, and the buyer makes up the difference in cash. An example would be that if a home has a list price of 300,000, bidding goes all the way up to 375,000 (not uncommon), and the lender’s ordered appraisal comes back at 350,000 , then the buyer would have to make up the difference in cash. The loan would only cover the appraised price (350k), but the seller still expects to get paid the full contract price. Why does all this matter? Because the buyer without huge cash reserves is now getting pushed out of the market, and much of it because of speculating investors out of state. Austin is the place to be, and the place to put your money, and unfortunately the word is out.

Why is this happening? Well, before the turn of the year there had previously been a steady stream of tech companies declaring they were moving headquarters or business centers to Austin. Many people cite Elon Musk’s announcement to move much of Teslas operations to Austin as a tipping point. Other companies began to follow, and the drain from Silicon Valley to here began. There are also aspects to the way California is managed, as a state, that have come into play and we’ve posted a very interesting video on the subject.

To me, though, that’s not a full explanation. Musk’s announcement, and many others, occurred months before January 1st. What was it that happened over Christmas break then that made seemingly everyone in the Bay area decide in unison to buy homes here? Was there a Bay Area newsletter or forum or Facebook group that had some kind of chatter event?? I just don’t know for sure.

Another possible explanation is that it wasn’t as much a quick demand shift as much as it was a supply shift. The beginning of the year is usually one of the lowest inventory moments of the year, and since that was already bound to occur, when it did this time it was simultaneously accompanied by a waiting, existing demand of higher level than Austin had ever seen before. That greater imbalance created a real feeding frenzy, such that prices have been driven up and even established a new norm, possibly not to return any time soon. In the very least, we’re hovering around .1 months of inventory in many places, which some statistics gurus in the area essentially just call ZERO months of inventory.

What’s now needed to get a home? Wow, sigh, it’s just tough. If you DO have cash savings, then you’re in a much better position than many others, and may be able to jump in the fray, bid 20% over, and make up the appraisal difference in cash. For most of us who don’t, however, there are a few other services that our brokerage offers that may be able to help you. We have partnerships that can allow you to make a cash purchase of your current or upcoming home, for a small fee. Ask for more information.

A second way is to specifically look for soft areas of the market. Not EVERY home everywhere has a rampant bidding war, we’ve discovered. What the market wants most right now is single family homes, preferably in highly rated school areas if possible, and very move in ready. The suburbs are VERY popular as well. So… if you can move yourself outside of the bell curve of most people’s preferences, you then have less competition. Many condos and townhomes actually don’t have multiple offers the first weekend. If that’s a housing type that can work for you, that’s an opportunity. If a home has a quirky floor plan that you like and others don’t, that’s an opportunity for you. Another opportunity is fixer uppers. Sometimes bidding is also less fierce on homes that are not quite as updated or move in ready as most people want. There are a few other soft pockets of the market that I can tell you more about as well, if you’d like to dialogue further. I want to be as helpful as I can, but can’t put all our best tricks on the blog. We truly would like to help you win a home, so please don’t hesitate to give us a call to learn more.