The real estate market has seen a resurgence in multiple offers, with many listings in Orange County receiving multiple bids from prospective, highly motivated buyers. This is a major reversal from what we’ve been seeing over the past 5-6 months and a clear indication perspective homebuyers are going to be feeling that competitive market pressure again. Let’s discuss the reasons behind this trend and what it means for both buyers and sellers.
One of the biggest reasons for the return of multiple offers is the current low inventory of homes for sale. Buyer demand still remains strong, but there simply aren’t enough homes available to meet that demand. This creates a competitive environment where buyers often bid against each other for the few available properties, leading to multiple offers, and thus over asking offers.
Orange County currently only has a 1.6 month’s supply of inventory, which means if zero new listings come on the market, all active listings will sell out in a month and a half. But if this number still doesn’t mean much to you without context, let me give you some: January 2020 had a 2.1 month supply of inventory, January 2019 had a 3.3 month supply of inventory, and the housing market was still strong then. Today, we have less inventory than we did in 2019, 2020, and half of the 2022 year. The last major real estate recession, experienced as high as a 12.2 month supply of inventory (March 2008). This means we’d have to see more than 7x the amount of inventory we have today. It’s just not going to happen.
Increase in Demand
Another factor contributing to the rise in multiple offers is an increase in demand for housing. The Fed has slowed down the pace of interest rate hikes, investment portfolios are kicking off the year strong, and potential homebuyers have begun to adjust to a higher mortgage interest rate. This, combined with the low inventory, has created a situation where there are more buyers than there are homes for sale, resulting in multiple offers again.
Timing can also play a role in buyer demand. We’re approaching the time of year when we start to see more potential homebuyers jump into the marketplace. We call this the “Spring Selling Season.” The Spring Selling Season usually kicks off right after the Super Bowl and will slow down around Thanksgiving. Since we’re just days away from the Philadelphia Eagles vs. the Kansas City Chiefs showdown, this only means buyer demand is ramping up and the selling season is upon us.
Mortgage Interest Rates at a 5-Month Low
Mortgage interest rates are another factor that has contributed to the return of multiple offers. Recently, mortgage interest rates hit a 5-month low, making it a compelling time for buyers that hit the sidelines to jump back in. This, combined with the low inventory and an increase in demand, has created a situation where buyers are eager to make a purchase, leading to multiple offers again.
The return of multiple offers in the real estate market is a clear sign that the market is back to its competitive ways. With low inventory, an increase in demand, and mortgage interest rates at a 5-month low, potential home buyers and sellers need to plan accordingly. Buyers, be prepared to have competition again. Sellers, you need to do everything it takes to make your home as compelling as possible to drive traffic. It’s important for buyers and sellers to be prepared and work with a real estate agent to help navigate the competitive market and reach your goals.