Low inventory helps drive up Bakersfield home prices
In the list of numbers summing up the Bakersfield, Calif., single-family home market last month, one figure better than any other explains why buyers are bidding up prices lately.
It's a measure of supply and demand: how long, at the current rate of purchasing, it would take to go through the full inventory of existing homes listed for sale. This "unsold inventory" gauge held at 1.5 months in July 2019.
A year later it stood at just three weeks, according to a report by Bakersfield's Affiliated Appraisers.
Several factors are heating up Bakersfield's home market lately, from low interest rates to demand from people emigrating from higher-priced areas. But an aspect that sometimes gets overlooked is the unusually low supply of existing homes for sale.
Frank St. Clair said he's never seen local sales inventory so low. The Bakersfield real estate professional said the situation only exasperates already tight conditions.
"There's not much really to show" potential homebuyers, he said. "It's pushing up prices."
A year ago last month there were 973 existing single-family homes for sale in Bakersfield. But by last month it was only about half as many: 499.
Sales are also up modestly but no other year-over-year market comparisons were nearly as drastic as the drop in supply.
Without question the limited inventory has benefited sellers. Median sale prices for existing homes rose 6.6% between July 2019 and July 2020, when Affiliated says the median hit $280,000.
The rest of the state is in a similar situation. The California Association of Realtors reported all regions of the state saw listings fall more than 30 percent in July as compared with a year earlier. California's median sale prices, meanwhile, rose a little less than 10 percent to hit $666,320.
Local real estate agencies say the result locally has been multiple offers at listings between $200,000 and $400,000. Within days after a moderately priced home goes on the market, they say, a buyer can expect to have a strong offer in hand.
Bakersfield real estate agent Sheeza Gordon said a low number in the unsold-inventory column is a sure sign of market strength.
"I think it's sort of a boom similar to 2005," she said.
Gordon's son William, who works with her as part of The Gordon Team at Watson Realty, said several properties he's helped market recently fetched multiple offers on the way to sale prices significantly above their list prices.
He recalled an "ugly duckling" home at 3902 Mont Blanc Terrace off Fairfax Road just south of Highway 178. It was listed at $295,000. Though somewhat quirky with some elements in bad shape, the property ultimately got nine offers and is now in escrow at an agreed price of $338,000.
The owner of Affiliated Appraisers, Gary Crabtree, said buyers' preferred price is another important aspect of local home sales. The highest price range in demand lately, where 40 percent of sales were in July, is between $200,000 and $300,000, he said.
Widening that window, he said two-thirds of Bakersfield's July home sales fell between $200,000 and $400,000. By comparison, Crabtree reported that only 7% of the market closed in the $500,000 to $700,000 range last month.
Crabtree said another aspect of the local market — new-home construction — continues at strong pace. But he noted builders trying to scale down their prices to deliver entry-level homes, where demand is strongest, typically face limitations from fees and material costs that drive up costs.
New-home sales in July numbered just 94, which was about one-seventh the existing-home total. The median sale price of a new home that month was $319,780, or 14% higher than the existing-home median.
The CEO of the Bakersfield Association of Realtors, Kim Huckaby, views low inventory as a function of strong sales activity.
Consumers are taking advantage of historically low interest rates, she noted, and they're attracted to Kern County's relatively high housing affordability as compared with other parts of the state.
"We will still need more inventory locally to keep pace with the demand," Huckaby said by email. "Luckily, we still have builders building and the land to build on."