What a difference a few weeks make in the Bay Area housing market! Our office is laden with tales of multiple offer situations and frustrated buyers struggling to find homes to purchase. To me this means only one thing, Bay Area residential real estate is once again hot and values are on the rise – a great time for you to get in the market as a buyer before there is even more competition and a perfect time for anyone contemplating selling to take advantage of low single family inventory. Take a look at this weeks Market Watch, where Rick Turley, President of Coldwell Banker’s Northern California division discusses the current state of the local market and the disparity between the San Francisco Bay Area markets and many other parts of the country. I’ve included excerpts from his blog below.
LOL: We’re having a wild house party- but too many sellers missing out on all the fun!
By: Rick Turley
It seems like every day I see national headlines decrying the “struggling” housing market and questioning when things will finally turn around. And then I get to work and read the reports from our Bay Area offices showing sales jumping and multiple offers for many if not most homes in a number of areas, and I wonder if we’re on the same planet.
The disconnect between the Bay Area housing market and what’s being reported on a national basis is getting stranger every day. In other parts of the country, agents and government officials are trying to figure out creative ways to rid their markets of a huge backlog of housing while buyers show little interest in jumping in to help. Then there’s the Bay Area, where the housing market is just the opposite.
Take, for example, a few of the reports this week from our managers and agents on the frontlines:
- From our Southern Marin manager: “Multiple offers continue to be the name of the game, but the difference from the past markets is we are now seeing multiple offers in all price ranges, not just REOs and Short Sales.”
- One $1 million-plus Mill Valley home in Strawberry garnered 11 offers last week, and another priced at $1.35 million had six offers. Both are rumored to be in contract for almost $300,000 over list price.
- “Buyers are getting frustrated over not getting the property in multiple offer situations, even when going substantially over the list price.”
- From our Los Altos manager: “We are selling more than we are listing in most price ranges. We had a healthy increase in the high end this past week with a $12 million and $7 million sale, several sales above $3 million and a dozen over $2 million.”
- “Inventories are at historic lows and the market continues to heat up!”
- From our Walnut Creek manager: “We’re seeing multiple offers on most every listing that comes on the market. A condo in Walnut Creek received seven all cash offers!”
The same stories are being echoed in all parts of the Bay, from San Francisco and the Peninsula to San Jose to the East Bay, and not just the more expensive markets. Buyers are pounding the pavement, cash in hand and looking for good properties to buy – now, if not sooner. “It’s nuts out there,” said our Cupertino manager. “A third of our sales resulting in multiple offers.”
Given the surging demand for housing you’d think sellers would be rushing to their local brokerage office to list their home, right? Guess again. The inventory of homes for sale is the lowest it has been in years, maybe even a decade, according to long-time industry observers. The result is that buyers are fighting it out for the few homes on the market listed by savvy sellers.
So what’s keeping the other sellers away when homes are going for great prices once again? Two things, both of which could come back to bite sellers who try to time the market:
- A misunderstanding of the state of the housing market.
Perhaps they are reading the national headlines and still believe the market is in the doldrums, prices are still going down, and they don’t want to sell at bargain-basement prices. If so, they’re missing an incredible opportunity. We’re having a honest-to-goodness house party with lots of anxious buyers. But somehow, sellers never got their Evite.
- They’re waiting for the Facebook IPO.
The thinking goes that once Facebook goes public, hundreds of employees will receive lucrative stock options which – eventually – they will be able to cash after the lockup period and then rush out to bid up prices for local homes. Wow, talking about betting on the come.
I’m not questioning the “Facebook effect” on the Silicon Valley housing market. Far from it, I think it certainly will have some impact on pricing at some point in some communities in the heart of the valley. But this strikes me as something like trying to time the stock market. I don’t know about you, but I’ve never been able to get that right. And I don’t think many others have as well.
The fact is that the real estate market has always come down to two simple factors: the law of supply and demand, and consumer confidence. Right now, both of those are telling me it’s a sellers’ market in the Bay Area. Consumers are feeling pretty darn confident as the economy picks up steam and the stock market presses higher. And the scales of supply and demand are tipping heavily in favor of sellers.
Smart, strategic sellers get that, and they’re making their moves now – not six months or a year from now. They’re the ones receiving multiple offers over their asking price because there just isn’t a lot of competition for buyers’ attention. They’re out there now, well before everyone else joins the party, tipping the scales back in favor of buyers once again.
Below is a market-by-market report from our local offices:
Silicon Valley – “It’s nuts out there,” our Cupertino manager said. Both sales activity and inventory are increasing and a third of sales are resulting in multiple offers. Our Los Altos manager reports that the single-family home segment of the market continues to surge and he’s seeing multiple offers in double digits and overbids of 10-15% on well-priced homes in good school districts in Los Altos, Mountain View and Cupertino areas. Some activity is driven from the “Facebook buzz” and some from the stock market uptick. Financing is still a problem for many and some buyers make cash offers to out compete the others and then try to get a loan during the escrow period. Interesting times ahead as we have lost inventory in Santa Clara County each week this year beginning the second week of January. We are seeing an uptick in multiple offers at all levels of the market in the Los Gatos area. In San Jose, our Almaden office manager says overpriced listings are not selling. However, you cannot underprice a home. It will and does get bid up – typically much higher than if you came out asking that price. Sellers who feel the market is healthier are confusing that it is time to raise prices. That’s not working. Overall inventory is lowest we’ve seen in a decade. Similarly, our San Jose Main manager says inventory continues to decline. Open houses are extremely active. Low interest rates and increased consumer confidence is driving the market. Multiple offers are common in all price ranges. Sales activity is also up in Willow Glen.
SF Peninsula — Our Burlingame manager says agents are “crazy busy” and honing their multiple offer skills as it seems that every home in every price point has multiple buyers making offers. We are back to the non-contingent 1-3% per offer over asking type of market, last seen in 2004-2006. One Burlingame listing had 7 offers. The winning offer was $200k over asking. One other listing had 9 offers, and $179k over asking only got a backup position. The challenge now is taking the buyers who are rightfully afraid of overpaying for a property through the process enough times and suffering enough disappointment that they begin to understand what it will take to be successful in an offer. In Half Moon Bay, our local office is seeing a lot of buyers from the over the hill coming to the coast with serious interest due to the low inventory and multiple offers situations on the Peninsula. Our Menlo Park manager says she’s seeing some “pretty vicious competition” for prime housing there. If buyers do not have 50% down, it is VERY difficult to buy a house. The local market still needs a lot more inventory. Buyers want to buy now. Our Palo Alto manager says they’re still suffering from extremely low inventory – probably a seven year low. There are approximately 20 listings for 425 agents in Palo Alto. Quite a few off-market sales are occurring – adding to an inflamed market. There was some good action in the Woodside office, including a couple of big sales – $8 million and $13 million. In San Carlos almost all sales are multiple offers due to extremely low inventory.