Great article I had to share by Carolyn Said in the SF Chronicle Friday. It falls in line with what The Caton Team has advised our buying clients lately. The market has definitely turned up the heat. And I honestly have mixed feelings about this. Don’t get me wrong – I am so happy to see our real estate climate heal from the crash. But I don’t want to see another bust either! My heart goes out to our first time buyers – most of who are pulling their hair out – trying to save enough of a down payment to compete with cash buyers – watching their smartphone apps track interest rates and counting their pennies, rather twenty dollar bills, when the rate sneaks up a half a percent. I’m also excited for sellers who’ve been waiting for the chance to sell without bringing money to the table. But then the next question arises – where do we go if we sell? The SF Peninsula is experiencing a unique real estate market and we are grateful for the opportunity. Enjoy this article….I’ve added my 2 cents in italics – please share your opinions too!
With high demand, low inventory, bidding wars return
In the latest sign of a rebounding real estate market, eager buyers vying for a limited pool of properties pushed Bay Area median home prices 24.6 percent higher in February compared with last year, according to a real estate report released Thursday.
“Drum-tight inventory, lower (interest) rates than most people alive have ever seen, and in some areas record levels of investor purchases (created) an unusual environment,” said Andrew LePage, analyst at San Diego’s DataQuick, which produced the report.
Another big factor – “unleashing of pent-up (buyer) demand,” he said. During the downturn, “for years, some people sat on the sidelines, afraid to buy. Now there’s been a shift in psychology in the past year with people switching from fearing prices might fall more, to fearing they will go up, so they want to buy now.”
This is so true. I myself was sitting in the seller seat since 2009 – it felt like no one was looking to buy. For years we were “on the market” with no offers in site. After pulling my condo off the market for one more try at the loan modification game – by October 2012 – I stuck out the For Sale sign again and within a week I had several offers. In the end 20 offers in had, 10 over the asking price and 5 buyers more than willing to pay a the upcoming HOA assessment! What a change in the tide!
An improving economy and job growth – factors that are stronger here than elsewhere in the country – also feed buyer demand.
We are blessed to live in the Silicon Valley where the tech, bio-chemical industries call home.
February’s sales median for the nine-county region was $405,000, compared with $325,000 in February 2012. It was the fourth straight month in which prices rose more than 20 percent compared with the prior year, and the ninth consecutive month of double-digit increases, DataQuick said.
The same dearth of inventory that amped up prices caused the volume of sales to slump 6.1 percent compared with a year earlier. A total of 5,404 new and resale homes and condos changed hands in the region in February, DataQuick said.
Return of bidding wars
Realtors around the area report that tight inventories are spurring ferocious bidding wars over properties – a phenomenon that holds true at all price points.
In Berkeley, John and Judith of the Grubb Co. sold three homes in recent weeks that listed for more than $1 million and went for substantial amounts above asking. One architecturally distinctive home was listed at $1.295 million but sold for $1.8 million, all cash – more than half a million dollars, or 39 percent, above the asking price.
“Everything in our market is getting multiple offers,” Judith said. “We need more inventory.”
At a different point on the scale, Annie, an agent with ZipRealty in the East Bay, recently took an investor client to tour a $399,000 four-bedroom tract home in Dublin.
“We drove up and saw all these people in a line,” she said. “I was thinking, ‘What the hey?’ and then I realized it was to get in this particular house. It’s human nature; if people think they can’t get something, they want it more. We stood in line for over an hour to get in.”
Her client offered $92,000 over asking and lost out to another investor who bid $100,000 more than the list price, she said. There were 40 offers.
“It’s an investor’s market right now,” Judith said. “Our first-time home buyers … are having a really hard time getting an offer accepted. It’s hard for them to compete with investors.”
Indeed, investors continued to be powerful forces in the market. Absentee buyers accounted for an all-time high of 28.2 percent of February sales, DataQuick said. All-cash buyers also hit a record, representing 31.9 percent of February sales. Historically, cash transactions have been about 12.9 percent of sales.
Realtor.com data show that listings here are being snapped up much more quickly than elsewhere in the nation. In Alameda County, for instance, listings go into escrow on average within 14 days of hitting the market. Nationwide, it takes 98 days for houses to sell.
Around the Bay Area, inventories of for-sale homes are about half what they were a year ago, Realtor.com shows. By contrast, nationwide, inventories are down about 16 percent compared with last year, Samuelson said.
That’s true in many micro-markets as well. Take San Francisco’s Nob Hill, for instance. A year ago, it had 30 homes for sale. Now it has just 15, according to Redfin.
Kiesha S, a listing specialist with Redfin, is preparing a two-bedroom Nob Hill condo – a remodeled unit that retains its early 1900s character, including stained glass windows, wood wainscoting and two fireplaces – to hit the market next week for $799,000, a relative bargain in that neighborhood.
She’s already had six agents ask if they could make pre-emptive offers.
“There’s so little inventory that things are definitely skewed in sellers’ favor,” she said. “Right now there seems to be a surge of buyers.”
Fewer distress sales
DataQuick said that changes in the market mix, such as fewer bargain-priced distress sales and more high-end homes, account for about half of the median’s increase. In other words, all Bay Area home values did not jump 25 percent in February, although values definitely are rising across the board. Distress sales – foreclosures and short sales, both often sold at a discount – are still above their historic norms but are declining.
About a third of February’s existing-home sales were distressed; a year ago more than half (53.4 percent) were foreclosures or short sales, DataQuick said. Just 13.6 percent of resales were foreclosures in February, the lowest level since November 2007.
At their peak in February 2009, foreclosures accounted for 52 percent of all resales. Short sales also declined, but not as much. They were 21.4 percent of resales, versus 27.0 percent a year ago.
The number of homes selling for more than $500,000 rose 27.7 percent compared with last year, while those less than $500,000 fell 14.4 percent, DataQuick said.
Prices, which went into free fall during the downturn, are still far off their peaks. The Bay Area median reached a high of $665,000 in summer 2007 and a low of $290,000 in March 2009. DataQuick said that if the current rate of increase holds up, the Bay Area prices will be halfway back to their peak this spring or summer.
By Carolyn Said
As a full time Realtor this is exciting news for growth in our area. As a potential buyer, I know I cannot save fast enough to compete with the overbids and cash offers coming down the pipeline. There is a small window for some buyers today, a window that can shut if interest rates rise while prices are also climbing.
My advise to buyers – get approved and get out there NOW! Be clear on your financial goals; be sure you have done your math and know what you can afford. Then look at what you can buy and re-evaluate your situation. The Caton Team is here to help – every step of the way – please call or email your questions or comments – info@TheCatonTeam.com
My advise to sellers – if you’ve been waiting for market and price recovery – now is the time! It appears some sellers don’t even need to prepare their home for sale, just listing the home on the market will get a line around the block. The Caton Team is here to help too!
I would love to hear your opinions too! – Sabrina
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Thanks for reading – Sabrina