Low inventory and high demand are pushing the local real estate market into multiple offers with the attendant frustration of the losing bidders.

The last few months of multiple offers has forced the sales price to list price ratio for single-family, re-sale homes up to 98.8%, a level we haven’t seen since May 2010.

Prices have yet to respond to the situation. The median price for homes has been moving in the $450,000 to $500,000 range since January 2011. We expect prices to break out of this range in the coming months.

The high end of the market, however that is defined in a particular city, is solid. The low end of the market is being driven by investors with cash and is seeing the most activity. The middle market, the move-up market is soft because the entry-level homeowners are still underwater.

What’s next?

That’s hard to tell because inventory is low putting constraints on the market breaking out. We don’t see that changing much in the near future for several reasons.

First, there is not a lot of new home building going on, which is necessary to relieve the pressure.

Second, many existing homeowners aren’t going anywhere. If they have good jobs here, where would they go? Plus, many of them are still underwater and can’t sell without taking a big loss.

Lastly, forget about phantom inventory. As of March, the banks owned 488 properties in the county. That number includes homes AND condos. There are currently 658 homes AND condos actively listed for sale.

Even if the banks put all their inventory on the market, it’s only five weeks worth!

We’re stuck with this market for at least the next year.

APRIL MARKET STATISTICS

Multiple offers are pushing up prices in select cities. The sales price to list price ratio went over 100% in two cities last month: Scotts Valley at 101.2% and Santa Cruz at 100.8%.

Home sales have been higher than the year before for eight out of the past nine months.

Inventory has been trending upwards, year-over-year, but that’s coming off the worst levels of inventory in the past ten years.

Pending home sales were up 56.5% year-over-year. Usually, this bodes well for the future. Unfortunately, in this multiple offer environment, many of these pending sales are not closing because the properties don’t appraise, the buyers can’t qualify for a loan, or they get cold feet.

Pending sales, in a normal market, track closed sales very closely. But, since 2009, the disparity between pending and closed sales has widened to historically high levels.

This is an extraordinarily tough market for buyers. It’s important to be calm and realistic. If you don’t know what to do or where to begin, give me a call and let’s discuss your situation and your options.