According to a recent ranking, the Solano County real estate markets of Vallejo and Fairfield…
San Francisco Bay Area bidding wars are back in the news. While the regional real estate market slowed during the early days of the pandemic, it has been firing on all cylinders since.
In 2021, bidding wars are common across the Bay Area real estate market. Home buyer competition is especially high in the East Bay counties of Contra Costa and Alameda.
In most cases, the underlying cause is the same. We are currently experiencing a severe shortage of homes for sale, relative to the amount of demand from buyers. In short, there are lots of buyers looking for properties across the Bay Area, but not enough inventory to go around.
These trends have caused significant home-price gains and bidding war scenarios all across the Bay Area.
Multiple-Offer Bidding Wars Seen in Bay Area
For many years, bidding wars have been a common feature of the San Francisco Bay area real estate market. But it tends to follow cyclical patterns relating to supply and demand. When demand increases relative to supply, we tend to see more bidding wars within the local housing market.
And that’s exactly what is happening now, as of spring 2021. Buyers are competing for limited inventory, sometimes making offers that exceed the original asking price. Bay Area bidding wars are the direct result of a supply and demand imbalance that’s affecting the entire region.
Earlier this month, local real estate agent Michael Delehanty told KPIX News that bidding wars are driving up sale prices all over the region, but especially within the eastern portion.
“We’re talking about Kensington and these areas. But to be honest it’s going on in Concord, it’s going on in Oakley and Brentwood and the entire East Bay,” Delehanty said.
East Bay Housing Market Particularly Hot in 2021
During the pandemic, we began to see housing demand shift into the East Bay. Cities throughout Contra Costa County and Alameda County experienced a surge in home sales that brought inventory to record-low levels.
As a result of this trend, bidding wars are now common in East Bay housing markets like Alameda, Fremont, Hayward and Oakland. To understand the reason why, all you have to do is look at supply and demand statistics.
- On the demand side, we have seen an increase in home sales over the past year. The record-low mortgage rates that occurred at the end of 2020 and early 2021 had a lot to do with this trend. On top of that, the pandemic gave many people a renewed appreciation for homeownership and the perks that go along with it (home offices, space, etc.). Quick home sales are another indicator of high demand.
- On the supply side, we are seeing low inventory conditions all across the East Bay real estate market and the broader region. Bidding wars are now a common occurrence all across Contra Costa County and Alameda County.
According to a March 2021 report from the California Association of REALTORS®, both Contra Costa and Alameda counties have very low inventory levels right now. Both counties had an “unsold inventory Index” of around 1.7 as of February 2021. This low reading indicates a tight housing market with limited supply.
Also, both of these East Bay counties have experiencing a decline in inventory over the past year. And things were already tight a year ago. So we have a situation where a tight real estate market has become even more constrained over the past 12 months or so.
This is the primary reason for real estate bidding wars within the Bay Area housing market. There is plenty of demand from buyers, but a very low level of supply. It’s a “lopsided” real estate scenario that probably won’t change anytime soon. Given the current state of affairs, these seller’s market conditions will likely persist through 2021 and into 2022.
Homes Are Selling Quickly, as You Would Imagine
Bay Area bidding wars are one sign of a hot housing market. But there is plenty more evidence out there.
According to recent real estate reports, homes are selling quickly here in the East Bay. And in many cases, the final sale price exceeds the original asking price. This is the result of multiple home buyers competing for the same property, while attempting to outbid one another.
A report provided earlier this month showed that most homes sold within Contra Costa County in February 2021 went off the market within two weeks. During that month, more than 80% of properties listed for sale were off the market within two weeks of the original listing date. This means that homes are selling quickly, and much faster than the national average.
Alameda County (the other “half” of the East Bay housing market) was right behind Contra Costa, with around 78% of homes going off the market within two weeks.
Here’s what it all boils down to…
Houses are selling quickly across the San Francisco Bay Area region, and particularly within the East Bay counties of Contra Costa and Alameda. Bidding wars are a common occurrence in these housing markets, and they’re driven by a stark imbalance between the number of homes for sale and the number of buyers in the market.
The current supply-and-demand situation is unlikely to change anytime soon. At least not significantly. As a result, Bay Area bidding wars will probably be a common feature of our housing market throughout 2021.