One in three homebuyers within the past year made at least one offer before seeing the property, according to a May 2017 Redfin survey. When the survey was conducted in the prior two years, just one in five homebuyers made offers sight-unseen.

This survey covers responses from individuals who had bought or sold within the past year in eleven major metros nationwide, including Los Angeles, San Diego and San Francisco. Of all respondents who purchased a home within the past year:

  • 41% of Millennials;
  • 30% of Generation-X-ers; and
  • 12% of Baby Boomers made an offer sight-unseen.

Redfin attributes some of the rise in sight-unseen offers to advances in technology, enabling the use of virtual tours and 3D walkthroughs. Without a doubt, home searchers most familiar with technology are more likely to comfortably research property from afar, evidenced by more sight-unseen offers originating from the younger generations.

But when given the option, homebuyers should prefer to see the home before purchasing. Sellers prefer buyers see the property, too, as this prevents unwanted surprises down the road.

The problem with the housing market in 2016 and 2017 is many homebuyers feel the low inventory situation means they need to place an offer immediately upon listing, often not leaving time for the (usually) necessary home visit.

Today’s faster, slimmer market

In California’s largest metros, for-sale inventory in May 2017 was lower than a year earlier. Los Angeles saw 12% fewer homes for sale than a year earlier. In San Jose, housing inventory was 29% lower than last year, according to Zillow.

Low inventory occurs when homebuyer demand exceeds new home listings. This situation causes:

  • homes to sell quickly; and
  • prices to rise more rapidly than incomes and interest rates indicate they ought to increase.

It can be an exciting time for sellers and their agents, as homeowners are eager to cash in on their investment. But these same sellers can be hesitant to list due to the unavailability of replacement homes on the market. This causes listings to diminish further and the number of real estate fees to fall.

The solution is more residential construction — and soon. Specifically, more low-tier homes suitable for most first-time homebuyer incomes are needed. This demographic has found it difficult to break into the housing market, made more frustrating by today’s excess of high-tier inventory.

Single family residential (SFR) construction starts are growing at a 10% annual pace in 2017, a fraction of what is needed to keep up with California’s growing population. Multi-family starts are in worse shape, roughly level with the previous year as of mid-2017. Meanwhile, vacancy rates are at historic lows.

Construction needs to rise to combat today’s low inventory, and that is expected to occur toward the end of this decade. However, without a concerted effort to add construction gradually, the state’s housing markets are at the mercy of overbuilding down the road when homebuilders overreact to demand. The resultant oversupply will send prices tumbling — a repeat of conditions seen before the 2008 crash.

To gradually build up supply and inventory, builders need the support of lawmakers, who have the power to loosen zoning restrictions and allow more density and smoother permitting processes.

Agents: Have you seen an uptick in sight-unseen offers? Are sellers more cautious about accepting these types of offers? Share your experience in the comments below!