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:
1. 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.
2. 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:
North Bay – Inventory shortages and multiple offers continue to be the order of the day, according to Greenbrae agents. One agent who held an open house reported non-stop buyers all day long and an offer Monday morning. The client of another agent lost out for the fifth time despite all cash offers. Is it really this hard to buy a home when you’re all cash at $1.5 million? One property got 11 offers, $200K over asking price. Our Southern Marin manager reports multiple offers continue to be the name of the game. One million plus dollar Mill Valley home in Strawberry garnered 11 offers last week, and another priced at $1,350,000 had six offers. Both are rumored to be in contract for almost $300,000 over list price. A Tiburon property priced over $2.6 million had five offers. The difference from the past markets is we are now seeing multiple offers in all price ranges, not just REOs and Short Sales. Buyers are getting frustrated over not getting the property in multiple offer situations, even when going substantially over the list price. In Northern Marin, our local manager reports that inventory remains low and the market is still hottest in the lower end of the price spectrum. The median list price is $598,200, and the 122 active properties have been on the market for an average of 122 days (and no, that’s not a typo, just a coincidence). Buyers are moving aggressively on well-priced properties, with a number of “flipping” companies competing with owner-occupiers – and usually winning any bidding wars, primarily due to the fact that distressed properties are not good candidates for conventional lenders. These deals are mostly cash. Lady Gaga spotted in Sonoma County taking in the food scene and enjoying the vistas, our Santa Rosa manager reports. There is some talk, unconfirmed, that the 25-year-old singer may be shopping for a house in the area. While that created quite a stir in the community, inventory levels are still at amazingly low levels with multiple offers creating a great deal of strain on Buyer’s agents. In the under-$500K category single-family home inventories are running at one month’s supply. In the $500K to $1M category SFH inventories are 3.1 months supply and in the $1 Million plus category inventories are improving but remain relatively high at 7.6 months. Agents are hoping Lady Gaga helps them with the higher end category. In Sebastopol, open house activity remains strong with lower priced and well-presented properties garnering the best response and the most offers.
San Francisco – The inventory shortage continues and has created an atmosphere verging on panic, our Lakeside office manager says. Faced with increasing competition in multiple offers, some buyers are retreating hoping for a quieter time to make their purchase. Multiple offer competition has become increasingly intense and favoring cash, large down payments and even pre offer inspections. Yet sellers have not yet responded by providing more product in spite of signs of price increases in certain neighborhoods. Our agents are continuing to sell homes by scouring stale and expired listings and even finding homes to sell before they come on the market formally. Our Market Street manager says he continues to see pockets of the city that are getting huge amounts of traffic, resulting in multiple offers. 50% of the offices’ ratified contracts in the second half of February resulted in multiple offers. Buyers are qualified, have strong down payments and are waiving many contingencies to make deals happen. One recent transaction came down to three similar offers, but the winning offer was a buyer that had gone into the property with their agent and done all inspections prior to writing the offer, therefore waiving those contingencies, which sealed the deal. A recent sales meeting discussion about the impact of Facebook and other tech money affecting our market led to some conclusive information- there are buyers out there looking to buy now, before the market is even more competitive. And conversely there are sellers who are holding their property back until the new pool of buyers get out there, which of course disconnects the supply and demand further. Our Sunset office manager says eight out 14 ratified offers were multiple offer situations. Buyers are definitely out there pulling the trigger. Couple of examples: One Sunset commercial building listed at $1.5M received nine offers with at least half of them all cash; two-unit building by USF received 20 offers, many all cash and almost all were above asking. A single-family fixer upper in Noe Valley had over 100 agents during an hour and half broker tour. If only we have more listings. Similar, sales activity is heating up according to our Van Ness office manager. One of his sales had 11 offers.
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.
East Bay – Buyers are buying, according to our Berkeley manager. The office board is filling up with more listings finally hitting the market as of last week. But the reality check regarding pricing is still eluding many homeowners. Tough conversations going on between sellers and their agents. Inventory continues to remain low in Livermore with 153 listings, which is very close to the low in 2012. We have less than one month’s inventory based upon the current sales pace in February. Total pending sales in Livermore in February were up 38% compared to January and up slightly from a year ago. Sales activity has increased, according to our Orinda manager. Buyers are making offers and many sales are in multiple offer situations. Our Walnut Creek manager says this is the lowest inventory agents have seen for years. Multiple offers on most every listing that comes on the market. A condo in Walnut Creek received seven all cash offers. Some areas such as Clayton, where the market has been sluggish, have finally started to move. Pockets of the market are showing and increase in prices.
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.
South County – Sales in the South County and San Benito County real estate markets started out very strong this year, our Gilroy manager notes. Inventory in Gilroy, Morgan Hill, and San Benito County hovers around 115 homes for each area. We are seeing an increase in all three areas of traditional sales coming on the market, although the majority of closed sales year-to-date are still either REO or short sales. New homebuilders are seeing some great success in moving their inventory, and are reaching out to agents like never before. As a result of their efforts, one agent in the Gilroy office has sold 10% of D.R. Horton’s Dakota subdivision thus far. The buyers are out there, interested and engaged, our Morgan Hill manager says. Morgan Hill agents are reporting large numbers of potential buyers attending open houses. Lately it is not unusual for 20 to 30 groups to walk through a home during an open house. Last weekend an open house in the Evergreen area of San Jose garnered over 100 visitors. Low inventory coupled with high buyer demand is reflected in higher final sale prices. Homes that are correctly priced are receiving multiple offers with buyers agreeing to pay over the original asking price. However, the one challenging note to this phenomenon is that appraisers continue to be very conservative in their approach to value and underwriting guidelines remain stringent.
Monterey Peninsula – Market activity continues to be very good over the past two weeks, our local manager reports. Having a three-day weekend is always helpful to agents, with people coming from out of town to look at property on the Peninsula. There are lots of buyers looking for good values across the price ranges except for the very top, where the showings are less frequent. Inventory in the lower price range is in short supply and when a good, less expensive property comes on the market, it is getting many offers. Carmel and Pebble Beach have had 36 sales closed since beginning of the year, 24 of them above $1 million. Our local offices had a great Previews sale last week, a short sale for $6,750,000. There have been 12 sales in Carmel/Pebble Beach over $1.5 million since first of year, with the most expensive on Scenic in Carmel for $8 million.