Market update January 2022 + What's an iBuyer?

Posted by Matthew Fletcher on Thursday, January 13th, 2022 at 7:40am.

The Orange County housing market in a nutshell:
The housing market is still dictated by an acute supply vs. demand problem.   As I write there are only 1,064 homes for sale in all of OC!  That’s down 60% from this time last year, and inventory was already low then.  My buyers are duking it out with 5-10 other buyers on every listing.   Why so few listings?  There are several reasons, but one is some more simple give and take math.   I’ve previously mentioned the increased presence of first time buyers in the 25-40 age range (the millennial generation).  While an older home buyer likely is moving up or downsizing, they are almost always selling a home while also buying one, creating a zero net gain on the inventory problem.  An already tight supply problem is exacerbated when a first time buyer buys and has nothing to sell, which is usually the case with young first time buyers.  Countywide, we're seeing absorption rates of around 150%, meaning for every 100 homes that comes on the market, 150 are sold!  In other words, buyers are buying every new listing PLUS half of the old listings that weren't selling, which can’t continue forever or we’ll be out of homes to sell!  As I prepare several new listings this month, and see my colleagues doing the same, I am optimistic that we are going to see an increase in available homes for sale in 2022, but we’ve got a big hole to fill!   Are you thinking of selling, or maybe buying your first home, your dream home, or an income property?  Call me anytime to talk about your real estate goals.
Client question of the week:  What’s an iBuyer?
Answer:  any buyer who is buys a home using purely data and analytics, makes minimal or no repairs, and then re-sells it on the open market.  Some of the more newsworthy of the iBuyers are Redfin Offers, OpenDoor, and Zillow.  I first noticed poorly marketed homes with big price reductions earlier this year and it was obvious something had gone wrong with this practice.  iBuyers had overpaid and under-prepared and their homes had to be reduced to sell.  I couldn’t reach an agent to negotiate my clients’ offer and we walked away in frustration.  It was a failure right in front of our eyes.  Zillow famously shut down their iBuying operation after overpaying for thousands of homes and realizing they didn’t have enough resources (contractors and agents) to prepare the homes and get them re-sold. 
If you're curious, take a dive and get an offer from an iBuyer and then let me know so we can evaluate it.  A great client of mine did just that.  Redfin made him a sight unseen offer of $620k for his Huntington Beach condo, not far off the most recent comps.  I knew his beautifully remodeled home would break records, so he declined the Redfin offer and we hit the market at $650k.  We got 10 strong offers and recently closed for $715k.  Please don't rush into anything when you're dealing with your biggest assets.  Call me anytime and let's review your options.

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