REO sales continue to drive the Sonoma County residential housing market. In June 175 REO properties were snapped up by eager investors and home buyers. That represents 37% of the Sonoma County real estate sales activity for the month. REO sale values ranged from $110,000 to $1,065,000 with an average price of $317,000.
The biggest question most new buyers have is whether they have to bid over the listing price (I also call it the asking price) in order to be the successful buyer. There are no hard and fast rules, but I like to show recent trends so people can see what is happening in the market right now. In my last post I showed a scatter chart with the most recent buyers all bidding over the asking price. This time I’ve got a chart of DOM (Days On the Market ) plotted against the percentage above or below the listing price for each transacation. This data covers Sonoma County Residential REO sales from June 1 to July 12, 2008.
To get oriented, find the 100 percent line along the left side. That’s where a new listing coming on the market today would show up. 100% represents full price. As you move to the right into the chart, dots above and below the 100 line represent transactions above and below the listing price. The first couple of weeks on the market is where the buying frenzy occurs as competing buyers work with their Sonoma County real estate agents to write a winning offer. You can see that there are dots both above and below the “listing price” line, so there is no magic formula for success. There are a few outlier dots where a property has been priced far from its value, but most dots cluster within 5-10 percent of the line.
To get a more accurate number for the bidding I reviewed all the homes that sold in the first 45 days they were on the market. 37 sold for over asking, 4 were at asking price, and 37 sold for less than the asking price. That’s about as balanced a market condition as you will find for freshly listed homes. Of the 37 homes that sold over the listing price, 6 closed at more than 10 % over the listing price. Except for the million dollar home you would have been the successful bidder on ANY home listed with a bid $55,101 over the listing price. There were three bidders working the other side of the over-under line. Three successful bidders came in at 10 percent less than the asking price and saved themselves about $30,000 per transaction.
As you read across the chart to the right, there is a very clear trend. Past 90 days on the market, there are zero offers over the listing price. The homes that have lingered on the market may need more work or might be in less desirable parts of the county, but it’s clear that an offer below the listing price is going to be successful. The longer it lingers, the lower the selling price will be. The chart shows that after six months, the successful bidders are at 80 percent or less of the listing price.
These charts are confusing, but they help show trends and they provide guidance for buyers who want to craft a successful strategy to buy a home in Sonoma County. Send me an email if you have any questions about these trends or would like help tracking and purchasing an REO listing in Sonoma County.