How to Buy a Home in California When Inventory Is Low

Home buyers in California often have to deal with low supply levels within their local real estate markets. This can create a series of challenges, including bidding war scenarios.

But when it comes to buying a home in California, there’s a potential solution for every challenge a buyer might encounter. Today, we will talk about some of the things you can do to increase your chance for success when buying a home during an inventory shortage.

Buying a Home in California With an Inventory Shortage

Here are some steps a buyer can take to navigate a tight real estate market with a relatively low number of homes for sale.

1. Setting a budget and saving money

Efficiency is key when buying a home in California during an inventory shortage. And one way to increase your efficiency is by having a budget in mind before you even enter the market. This will allow you to make a strong offer when the time comes and to negotiate with confidence.

It also helps to start saving money — and the sooner the better. Home buyers need to have funds available for a down payment, closing costs, an earnest money deposit, and other purchase-related expenses. If you have all of the necessary funds in the bank, sellers could be more inclined to accept your offer.

2. Conducting local market research

Depending on the overall pace of your local market, you might not have a lot of time to evaluate the asking price of each individual property. When supply levels run low, homes tend to sell faster. In some cases, a seller might receive multiple offers within the first week of listing the property. This is where market awareness comes into the picture.

By researching your local real estate market ahead of time, you’ll have an easier time evaluating the asking price for a particular property. This in turn can help you submit an offer more quickly, possibly getting ahead of other buyers.

In contrast, a buyer who skips the market research might feel less confident when making an offer. They haven’t done their homework with regard to recent sale prices in the area. So they might not know if they’re making a strong enough offer. This could lead to a delayed offer and a missed opportunity.

3. Getting pre-approved for a mortgage

Do you plan to use a mortgage loan to finance your purchase? If so, you can also benefit from getting pre-approved by a lender before you start house hunting. Being pre-approved means that you can submit an offer more quickly, because it determines your maximum loan amount.

Without a pre-approval, a house hunter might waste valuable time on back-and-forth communications with their mortgage lender. This can be detrimental in a real estate market with low inventory levels, which includes most of California in 2023.

4. Working with a knowledgeable real estate agent

An experienced real estate agent can give you an added advantage when buying a home in a low-inventory market. Your agent can help you submit an offer in a timelier fashion, compared to if you handled it on your own.

They can also do a comparative analysis right there on the spot, while you’re visiting the home. This allows you to get an offer in more quickly, which could make the difference between getting the home or losing it to another buyer.

5. Making a strong offer the first time around

When housing market supply levels are low, sellers typically receive more than one offer after listing their homes for sale. In this scenario, multiple buyers have to compete for the same property. These multiple-offer scenarios are common in California, especially at times when inventory levels have declined.

This underscores the importance of making a strong offer when buying a home in a tight market. After all, if you’re competing with other buyers, you probably won’t get a second chance to present an offer to the seller. So you’ll want to make the first one as strong as possible.

By analyzing recent sale prices for similar homes in the same area, you can determine a good offer amount for the property you’re interested in. This is what real estate professionals often refer to as a comparative market analysis.

But you might not have a lot of time for such an analysis, when buying a home amid low inventory levels. You might have to submit an offer quickly, due to competing offers from other buyers. In such cases, it’s usually best to make the strongest offer you can without exceeding your budget.

6. Being realistic about your negotiating leverage

When housing market supply levels run low, as in California, home buyers need to exercise a bit more caution when negotiating the sale price. That’s because sellers tend to have more leverage.

This is another reason to work with an experienced real estate agent when buying a house in California. Your agent can help you navigate the delicate process of back-and-forth negotiations, while minimizing the risk of losing the home to another buyer.

7. Knowing your limits in a bidding war

Low inventory levels within the real estate market often lead to bidding wars among home buyers. A bidding war is when multiple buyers are interested in the same property, so they keep raising their offers in order to outbid each other. Bidding wars can drive up the final sale price, sometimes significantly.

If you’re lucky, you’ll be able to find a suitable property and negotiate with the seller without ending up in a bidding war. But there’s a chance it could happen, so you’ll want to be prepared. In that case, it’s important to stay within your budgetary limits and to know when to walk away.

Buying a home in California when supply levels run low can be a challenging process. But many home buyers just like you have found a way to succeed, even when low inventory levels create additional obstacles. If you establish a budget, do your research, work with an agent, and make a strong offer, you can greatly increase your chance for success!