Low inventory and high demand are pushing the local real estate market to the extreme with buyers waiving contingencies, property inspections and even appraisals.

The last few months of multiple offers has forced the sales price to list price ratio for single-family, re-sale homes up to 100.6%, a level we haven’t seen since May 2010.

Prices have followed with the average home price now at it’s highest level since July 2008.

The high end of the market, however that is defined in a particular city, is on fire. The low end of the market is being driven by investors with cash and is also totally out of whack. 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 incredibly low. Home inventory is at its lowest point since December 2004. 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?

Lastly, forget about phantom inventory. As of March, the banks owned 1,757 properties in the county. That number includes homes AND condos. There are currently 1,552 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

As was to be expected, the largest price increases for single-family, re-sale homes were in Los Altos, up 19.7% year-over-year, Palo Alto, up 22.8%, Morgan Hill, up 17.2%, and Mountain View, up 10.6%. These are the median prices.

Even more telling is the sales price to list price ratios. Palo Alto weighs in at 108.6%. Mountain View and Cupertino were at 104%. Los Altos was 103.4%. The county as a whole was at 100.3%. Even San Jose was at 100%.

Home sales were down 3.9% year-over-year, and that’s not a function of low demand! Home sales have been lower than the year before for the past five months.

The condo side of things isn’t much different. Inventory is at its lowest level since January 2005, The median price for condos was up 22.6% compared to last April. The sales price to list price ratio was 100.9%.

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.