Sellers are benefiting from a perfect storm of economic factors right now. Increased confidence, low interest rates and historically low inventory are driving prices on some of the early spring offerings very substantially over list, to some truly staggering prices. We started with high prices in 2012, and prices have jumped higher and more steeply this first quarter.
New records for lowest amount of inventory. We currently have in our six-city local region (Albany, Berkeley, El Cerrito, Kensington, Oakland and Piedmont) enough inventory to last only two weeks! Oakland just lead the nation in the steepest decline in inventory from this time last year: an 84% drop! That's right: we thought we had low inventory in Oakland last year, and this year we have 16% of that low number! The number of sales in Berkeley, for example, is down 32% from a year ago.
What most people want to know is are we back to peak prices of 2006-2007? I believe some individual homes are at those levels, and some have exceeded them. Those tend to be properties that are fully updated, and near amenities. The desire for a high Walkscore, meaning very near transportation and urban services, especially coffee, is very high indeed. Prices, on average, are still well below the peak average price, which was hit in Q2 2007: $805K in the six-city region. That compares to $505K at end of Q1 this year. For Berkeley the peak number was $1,016M vs. $892K now. But the averages are just that.
Homes that combine the most desirable features in the most sought-after locations are receiving offers that are news-worthy. We have numerous recent examples of homes selling 30-40+% over list price. Rockridge and North Berkeley saw that behavior last year, and now we see it in El Cerrito as well. However, on average again, homes are selling about 9% over list. And there still are properties that sell at list, or require price reductions or fail to sell, even in this pistol-hot market.
There is a great deal of cash in this market, and at all price points. While it is impossible to track the percentage precisely, indications are that about 30% of our East Bay real estate transactions are closing with all cash.
Buyers could read this news and decide that this is not the market for them. For some that may well be the right decision. But for buyers who are right on the cusp of affording a modest home in their preferred location, I urge them to stay focused and active. We are already seeing more homes appear on the market each week, and more inventory will slow the number of offers per property, and ultimately the rise in prices. The market is being defined by the current homes in contract, and those pending sales will eventually be the listing prices of the future. Waiting is likely to only result in facing higher starting prices.
We know more inventory is on the way. Each colleague I share stories with has a listing or three they're working on, as am I. Stagers report being booked for dates through July. So as quickly as the 2013 market heated up, it could slow down. Hold on for a wild ride!