Berkeley, and the surrounding communities of Albany, Kensington as well as strong neighborhoods of Oakland such as Rockridge are experiencing the problem of low inventory, and did through most of 2009. I hear that the same condition applies to several neighborhoods in San Francisco. We're not just talking about the seasonal slowdown we would expect in the winter months.
We know that the high unemployment rate we're experiencing, especially in California, means that many home owners are concerned about whether they'll continue to have salaries to support their current mortgage. When a job could be at risk it's hardly a time that inspires people to sell, unless it is to a situation with a lower cost home or lower taxes. That probably means moving away from the Bay Area!
But I believe a dominate reason for the low inventory is misinformation on the part of sellers. There are many sellers who read the national, or even state-wide news about a "glut of inventory" and sluggish sales in many areas, and become frightened of placing their property on the market. Much of the general news has been that the real estate market is in the doldrums, with price declines. If sellers do not take the time to consult with a local expert REALTOR, who can inform them of the conditions in their micro-market, they may be harboring very false impressions.
In Berkeley we've become accustomed to overbidding, and except for a few months in early 2009, overbidding has continued to be a common occurrence. This is so much the case that in Nov., and Dec. 2008, and Jan. 2009 the median sold price was higher than the median list price in Berkeley. That was also the case in three out of the past five months of 2009.
It is true that on average, prices have dropped about 12% in Berkeley within the past year, but within those averages are a small percentage of distressed properties. With low inventory, those properties can pull down the averages and give the impression of a market that is less robust than what we as agents are experiencing.
My buyer clients in Berkeley must be prepared for overbidding in the range of 10% over list on the well-located, well-priced homes, depending on the number of offers. My last buyer of the year needed to pay almost 20% over list when competing against three other buyers, one of them all cash, and this in the $1M range. A client buying a foreclosure had to do the same, at a lower price point but competing against 16 other buyers.
So if we had to explain in one word why there is low inventory, I would use the word fear. Fear on the part of the sellers that their financial situations could change; fear that the buyers' situations could be shaky and a sale might not go through; fear that when it's time for them to be a buyer, they'll find it difficult to acquire the home they want. But at least in our area, if the sellers have the courage to bring their home on the market, and price and prepare it following the advice of their REALTOR, the odds are excellent that it will sell, and command a fine price.
I look forward to hearing about the experiences of other agents in different areas. Happy New Year!