Million Dollar Home Sales on the Rise in California

According to DataQuick and as reported in the September issue of Dream Home Magazine, California's million dollar home market is looking up...way up! In fact, the numbers for the 2nd quarter of 2012 (April - June) showed that sales of high end properties in California were at their highest level in five years.

In fact, home sales for properties over $1 million outpaced overall home sales by a healthy margin. Overall home sales also saw an increase in year over year for the second quarter, up a little more than 10% from last year at this time. But for the same period, luxury homes saw an increase of 18.5% as well as an increase of near 80 from the first quarter of 2012.

In the California luxury real estate market, 7,763 homes were sold from April to June of 2012. Of these high end sales ($1 million and above), more than 1,500 homes were in excess of $2 million. And for many markets in the Golden State, including many communities around the Monterey Peninsula, that is good news.

Feeding Frenzy: Today’s Low-Inventory, Multiple-Bid Real Estate Environment

The term “feeding frenzy” happens when there is not enough _____________ (fill in the blank) and there is frenzy among those who want it, whatever it is.



This is one characterization of the San Francisco market and other hot markets throughout the country. Some properties are garnering three, five, ten, or even 15+ offers. Very often, this results in the property going 10%+ over the list price.

Feeding frenzies happen because there is not enough inventory to satisfy the many buyers in a particular real estate market place. This leads to multiple offers and the sale price over asking. Duh!

Here’s the rub. Most sellers, if they bought in 2004-05 during the run up to the 2007-08 peak, are not able to get out with a whole skin, even if there are multiple offers and the price goes over by 10%!

I don’t like to see my clients pay one dollar more than they need to. I trust my negotiating skills to get them the best deal. Like other real estate agents, I have been party to multiple offer situations in the last several months. Initially, I thought that buyers making offers at 10% to 20% over list price were crazy. Now, I’m not so sure. Maybe they aren’t so crazy.

Buyers who are paying 10% to 20% over the listing price are often paying prices that we saw at the peak. This is not so bad if they plan to hold for the long-term. I believe that the market will bail them out so long as they don’t NEED to sell in the next several years.

This reminds me of the psychology of Facebook stock buyers who bought when the stock dipped to $25.52 after its IPO ($38.00), a decline of 23%. It is now hovering around $18.00+. Facebook buyers on the way down were thinking long term with the hope that it would eventually reach and surpass its IPO price. I think they may be right. After all, Facebook is one of a kind, just like select real estate in select locations like the Monterey Peninsula for example.

With mortgage rates at an all-time low and inflation muted, buyers paying 10% over list probably will have the last laugh.

Taking a look at local prices using Carmel by the Sea as an example, the last 6 months has shown a 93% sale to list price ratio.  Compared to 2009 when the average was 90%.  This is a comparison between what a house lists for and when it ends up selling for.  Using Monterey homes, 2009 had an 86% sale to list ratio and first part of 2012 shows 99%.  This shows a couple of factors, 1:  the market is clearly picking up and 2: sellers are understanding that if they price their house close to actual value it will sell faster.  Hence the multiple offers that are popping up here on the peninsula creating our very own feeding frenzy.

Give me a call to find out what homes are priced right and creating their own frenzy in your area.

To listen to the broadcast on KRXA regarding this topic, click here.

© Patty Ross, KRXA Radio Show #233, Recorded Sept. 7, 2012