From the desk of Rick Turley:
The Bay Area’s housing market is red hot these days with so many qualified buyers chasing so few homes for sale. Multiple offers and properties selling well over the asking price has become the norm in many communities. Now, the national – and even international – news media is catching onto the trend with stories about the robust seller’s market here and elsewhere in the U.S.
I was just interviewed by USA Today for a story that ran a couple of weeks ago, Homes sellers are scarce as spring buyers stir. And I also recently spoke with Money magazine, which just came out with a similar story on the hot housing market here in the Bay Area and elsewhere around the country. Finally, I spoke Friday with a reporter today from the Wall Street Journal’s Hong Kong bureau about Chinese buyers investing in our local housing market.
USA Today’s story led off with our very own suburb of Lafayette, pointing out there are no for-sale signs on one of the town’s busiest streets with 116 homes. As I told reporter Julie Schmit, in some areas like the Silicon Valley the supply of homes is down to a week. Bare in mind that a normal healthy market might have a four-six-month supply of homes.
Buyers and agents are literally waiting for the next house to come on the market in many neighborhoods, I told USA Today. And although listings have ever so gradually crept up since January, they are nowhere near enough to meet the strong buyer demand.
A big reason for the shortage of listings is that many homeowners who might like to sell may not be listing because they are underwater on their mortgage or don’t think they have enough equity to sell and buy elsewhere.
However, that’s changing all the time as multiple offers and bids over asking price are pushing up home prices. Properties that looked like they would have to sell as a short sale have ended up pricing out as a traditional equity transaction. We’re seeing it happen every day around the Bay Area.
Many homeowners might be surprised to learn that they no longer fall into the “distressed” sale category and may have equity in their home after all.
In the Money article, reporter Beth Braverman reminded readers that sellers have the upper hand in many parts of the country. She also made mention of some Sellers getting overly aggressive with a list price, and that over pricing, even in today’s market can lead to longer shelf life and not the best result for sales price. She quoted me as saying: Catch buyers’ attention – and get multiple offers – by pricing your home in line with comparable sales, “then let the market take it higher.”
Money reiterated what we’ve been saying to homeowners: “It’s tempting to postpone selling to hold out for a better price. But if you want to move to a larger place, act sooner rather than later. While you’ll be able to sell your home for more if you wait, the appreciation on the trade-up home will be greater.”
My hope is that as prices continue to improve and word gets out – thanks to news stories like USA Today’s, Money magazine’s and the Wall Street Journal’s, more listings will hit the market and move our housing market back toward a better balance.
Below is a market-by-market report from our local offices:
North Bay – As the market continues to challenge buyers, we are beginning to see signs of more sellers entering the market, according to our Santa Rosa manager. Many of our agents are talking to sellers who have recently contacted them to put their homes on the market. Our hope is all of this talk starts to reward us with an overall increase in inventory levels. While the number of single family homes sold year over year for the month of February was down about 20% overall, the median sales price increased at about the same percentage. In the million-dollar-plus category, there is approximately the same number of units for buyers to choose from as there were last year, although the number of units sold has increased year over year by approx. 40%. In the Sebastopol area, new listings (the very few we see) are flying off the shelf. We are experiencing a sellers’ market unlike anything our local manager has seen in maybe a decade. He is consistently seeing just a 5-6 week supply of inventory year to date in Sonoma County. In Southern Marin, the report is lack of inventory, multiple offers, more properties coming on in the $3 million range (and selling quickly). The market is still hot and hungry for new listings.
San Francisco – Preemptive offers are so common now, our San Francisco Lakeside office manager reports. Buyers and their agents are getting the idea that the preemptive offer really has to be significantly over the asking price. However, there are a few more properties coming on the market, which has given agents hope that the desperate shortage of listings may not last too much longer. Our Lombard manager says he’s seeing record-breaking prices over asking, especially on homes under $1.5 million, with some signs of overly aggressive high pricing. So while the market is extremely hot, it’s not stupid, he notes. Cash still carries the day. It’s “more of the same,” according to our Market Street office – more buyers hoping for more houses to come on the market, and more sellers achieving prices not seen since the height of the market. Due to the frenzy, even the most recent comps are a poor indicator of what a house will actually sell for. The only way to not compete with multiple offers is to get the inside track on something that’s pre-MLS or is a pocket listing. Demand for housing continued to be strong in the Sunset area, but inventory levels remained extremely low. Prices continued to move up in a rapid pace. Most listings are getting anywhere between 10-30 offers. The question to buyer is: It’s not how much the house is worth, it’s how high are you willing to pay to beat the competition.
SF Peninsula — Burlingame agents continue to sing the “multiple offer blues” with buyers chasing every home that meets their needs and finding lots of competition. The number of offers can be from 50+ to as few as 3. The game definitely changes daily and agents are working hard to keep up and make sense of things. More activity occurring in the high end (10+ mill.) Some beautiful new listings have come to the Hillsborough market. One recent sale at $11.1 mill. has set the stage for buyer confidence. We are seeing cash offers in this price point. Hillsborough currently has 48 active and 20 pending sales – the most pendings in months. Our Burlingame North manager reports inventory is roughly 40% lower than last year at this time. More than 71% of all the SFR closed transactions (reported in the MLS) in the six cities he survey sold for the list price or more. Sales in the $5 million+ range are improving. Across the hills in Half Moon Bay, our local office said many mid-Peninsula buyers are looking for properties on the coast. They are being pushed out of the crush of multiple offer frenzy they have seen on the mid-Peninsula, which is starting to drive up our prices. Our Menlo Park manager notes that both the stock market and local real estate market are at their pinnacle since 2008. She said she has never in 37 years seen so many buyers chasing so few properties. Anything listed from $700,000 to about $1,100,000 is getting bid up at least 10%, up and down the central Peninsula. Even some properties are getting over bids when there are no other offers presented, which speaks to the ‘fear’ that another offer will show up very quickly if the buyers do not ‘buy’ the property off the market by offering a higher than list price. Dirt in Palo Alto is going for about $400 dollars a square foot, commensurate with prices in Beijing or Singapore. If Atherton acres were selling for that price, they would be selling for $17 million. In the Palo Alto area, the market remains consistent: low inventory, high demand, multiple offers. It’s a similar story in San Mateo, Redwood City, San Carlos and elsewhere. A three-bedroom home in Belmont listed under $500,000 received 39 offers including the winning offer of all cash, no contingencies, a 10 day close and a possible 90-day rent back at an extremely low rent. Woodside has had some action with the $4-6 million range moving. Interestingly, our local manager notes, buyers can get a fabulous 3 acre parcel with incredible views and a reasonable house for the same price as a home on a half acre in Menlo Park. Prices in Menlo have increased so greatly and Woodside prices have eased, so the typical sale prices seem to be getting closer.
East Bay – Listings are finally flowing in and beautiful ones at that, according to our Berkeley manager. Still, multiple offers on 99% of sales with listing agents reporting 37+ disclosure packets requested and offers 5-24 for each property in just this past week. When her agents check recent sold prices, she can hear them gasp. Happy sellers of course, but frustrated and stressed buyers. There is no sign of the Oakland-Berkeley-Piedmont market cooling down. As we are seeing the closed prices come in, some are going over as much as 47%. The buyers are still out in droves at the weekend open houses, with groups waiting to get in before they open and hanging out long after they are closing. Multiple offers in the East Bay have ranged between two (and there were only a couple of those) to a high of over 30 for a single family 3/1 just over 1,000 sq ft in Union City. In the Lamorinda area, homes that are priced well continue to go into contract immediately – most with multiple offers and over asking price. Buyers are frustrated but continue to make offers and understand fast action is required in the current market. Our Walnut Creek manager says there are multiple offers on every listing and some listings are selling prior to going on the market. A good number of cash sales occurring in all price ranges. All corners of the market are showing strong signs of appreciation. The agents are feeling like it’s 2005-2006 all over again. Some are concerned and wondering how long this can last. The good news is that we are seeing more new listings come to the market. Most are equity sales, very few bank owned or short sale listings.
Silicon Valley – Our Cupertino manager senses a slight change in the market. Some buyers are still making “crazy” offers, but a number of properties are getting fewer or no offers. In the Los Gatos area, multiple offers and over-bidding continue to be the norm at all price points, according to our local manager. Active inventory is down 34% in the town of Los Gatos from the same period last year. Inventory is growing as are sales in the San Jose Almaden area. Every single agent in our office is in a multiple offer situation. As we move into the spring selling season its full steam ahead in the Willow Glen area – listing inventory is slightly increasing , buyer demand is still outpacing listing inventory, and agents are still seeing multiple offers for most properties. However within the last two weeks several agents have been successful in getting their buyers into contract. So there is some light at the end of the tunnel for buyers. However they need to be “strong” buyers – either all cash or 50% down seems to be the winning formula.
South County – As of Thursday there are only 31 single-family homes listed in Morgan Hill under $1 million and only three condos. There just are slim pickings for buyers, our local manager laments. At this point, sellers are driving the market and, in most cases, receiving multiple offers and selling their homes in excess of their asking price. Almost all offers are being written without an appraisal contingency—with the buyer guaranteeing that they have funds to close regardless of a lender’s appraisal. We are also seeing an increase in interest in homes listed over $1 million. Our local office just sold several properties listed over $1.5 million, which is the high end for South County.
Santa Cruz County – More properties are coming on the market and selling as quickly as they are listed, usually with multiple offers (as high as 14 offers on a property priced at $360K). That is if they are priced right. Those seen as undervalued or right-valued in the right neighborhood are moving rapidly. Tip the price a little too high and the property languishes. An indication of the finicky buyers and sellers and the difficulty of pricing today.
Monterey Peninsula – The real estate market on the Peninsula is hot—even busier than last year, which was nothing to complain about. Agents are writing offers fast and furiously as buyers see inventory shrinking. This spring will be an excellent time for sellers to get their homes on the market in this region, but they need to be ready to move quickly.