If you had to guess, what would be the most common question you think a Realtor is asked?
“What’s my home worth?” No.
“Should I stage my home when I sell it?” No.
“Do you think interest rates are going to rise?” No.
All very close, and all very common questions we certainly answer more than we should (which is precisely why for the better part of a decade I’ve helped you answer those questions on your own), but by far the most common question asked by countless people (friends, clients, strangers at parties, on the ski lift, or out surfing) is….
“How’s the Market?”
This question, although very simple, is so incredibly complex to answer when we’re talking about San Francisco. If I get asked this question right before the elevator door opens, the answer is “It’s good…great in fact.” But if I get asked this question when trying to remain zen standing in a 30-45 minute lift line at any of my favorite ski resorts, it becomes much more complex, and I can dig a little deeper…
“Are you thinking of buying or selling?”
“What price range are we talking about?”
“You talking single family home, condo, income, commercial, rental, or multi-family?”
“What neighborhood, actually, what street (down to the block) are we talking about?”
“We talking about selling a tenant occupied property?”
“Have you made any upgrades?”
“When did you buy?”
“When are you thinking of selling? Now, or in the future?” (This is where I whip out my crystal ball.)
The follow up questions can go on for days, because there is not one single simple answer to this very complicated question. Generally, the market is GREAT. It’s not gang-busters anymore. It’s not ridiculously heated, but it’s hot. It’s not making our heads spin with every transaction (this could be because our reality is tilted). But by all accounts, it’s still incredibly good.
In my world, the majority of my listings still receive multiple offers, open houses are packed (also according to my colleagues after the first “real” weekend of open homes since the New Year), and buyer interest is high. However, buyers are much more stubborn and unwilling to go that extra little bit into crazy overbid territory, opting instead to walk away, and letting their dream property go. As a seller, when you’re expecting 8-10 offers, and you only get one or two, panic sets in, as this is not “normal”, but I think is something to get used to. As a buyer, confusion and self-doubt take over…”did I overpay” being the most common thought. “Was I the only offer?”
Take this bit of market uncertainty, couple it with open houses being packed, and it makes for some challenging situations. Properties that were once a guaranteed Maximum Overbid, now aren’t such a guarantee, but at the same time we’re still seeing others that do, in fact, defy logic and make your head spin right off your shoulders! For buyers, this makes it harder to come in at a price that is going to both be competitive, but also not stupid high. Are you going to be the only offer? Will the property appraise? For sellers, it really becomes a tense waiting game when offers are supposed to be piling up. Are you going to get just one offer, or multiple? Likely the latter, and truly you only need one offer from a buyer that THINKS there is another to make for an overbid (that’s an entirely different blog post). It’s a balancing act, and not one that is easily navigated.
Anyhow, that’s a little bit of anecdotal information from my world, but what do the data crunchers have to say?
I was a little late to get this to you (I went M.I.A over the holidays and it was awesome!), but Keller Williams people had this to say at the end of December:
Entering the heart of the holiday season, the number of sales and sales prices were mixed in the single family home and condominium/loft/TIC markets.
Single family home median sales prices dipped in November to $1,372,500 from October’s all time high of $1,407,500, but are still up $110,000, or 8.7%, from November, 2015.
In condominium/loft/TIC sales, median sold prices have been bobbing up and down between $1,000,000 and $1,150,000 for the past two years, and closed November at $1,044,500, just above the $1,023,500 where they started in January. Year-on-year, there is a 6.9%, or $78,000, decrease in the median sold price.
Inventory levels in November took their typical seasonal nosedive, dropping to just 1.7 months of inventory for single family homes and 2.1 months for condo/loft/TICs.
Finally, the median percent of list price received for single family homes was the lowest it’s been since January 2015: 106.8%. This could indicate that prices are peaking in the single family home market.
According to the data crunching guru himself (Patrick Carlisle) at Paragon Real Estate:
San Francisco median house prices continued to appreciate in 2016, albeit, at 6%, at a considerably slower rate than the previous 4 years, while condo prices basically plateaued (and indeed dipped in some neighborhoods). As with almost everything to do with real estate values, it boils down mostly to supply and demand…
It all boils down to a continuing strong demand for houses meeting a steadily declining supply: Even with a market that cooled somewhat in 2016, competition between buyers continues to push house prices up, especially in more affordable neighborhoods. The equation is different for condos, which has become the dominant property-sales type in the city: A cooling market is meeting increased supply. There has been no crash in condo prices, but areas with the greatest quantity of new condo construction have seen small declines.
Not satisfied with Keller Williams, and Paragon data? Similar story from Pacific Union:
Home price appreciation in the San Francisco and San Jose metro areas is expected to more than double the national rate this year, while rising mortgage rates will shut more first-time buyers out of the housing market.
Those are two key findings from Realtor.com’s 2017 National Housing Forecast, which ranks America’s 100 largest real estate markets based on expected home price and sales gains. Nationwide, home prices are forecast to grow by 3.9 percent, down slightly from 2016. The Western U.S. is posed to lead the nation for home price appreciation, at 5.8 percent. Six of Realtor.com’s top 10 real estate markets for 2017 are located in Western states, and price appreciation in most of those cities is also expected to slow this year when compared with last year.
The Bay Area’s two largest real estate markets landed in the middle of Realtor.com’s overall rankings, with the San Francisco metro area at No. 37 and San Jose at No. 39. Home prices in San Francisco are projected to grow by 8.41 percent in 2017 — the most in the U.S. — followed by San Jose at 8.26 percent.
Sales volume gains in San Francisco and San Jose are anticipated to be lower than the national average of 1.9 percent and prevented the two cities from ranking higher on the list. Home sales are projected to rise by 1.17 percent in San Francisco and 1.26 percent in San Jose. The modest sales gains are likely the result of low inventory, an ongoing problem for Bay Area home shoppers. Nationwide, inventory is down 11 percent, and Realtor.com does not expect supply conditions to improve in 2017.
According to Redfin, on a hyper-local level, we now play second (actually fifth) fiddle to other neighborhoods around the country as far as competitiveness is concerned. In fact, Factoria (Bellevue) Washington took the top spot:
“We put the home on the market on Thursday, got immediate interest and accepted the strongest offer at $15,000 over asking price by Sunday,” recalled Redfin real estate agent in Bellevue, Marina Pelzel. She helped her clients sell their three-bedroom townhome in the red-hot neighborhood of Factoria in Bellevue, Washington in August. In addition to the high offer price, the buyers waived the inspection contingency and already had their loan fully approved by their lender, making it nearly as strong as a cash offer.
Factoria earned the distinction of being named the most competitive neighborhood for homebuyers in 2016. Our ranking is based on several indicators of competition, including the percentage of homes that sold for more than their asking price, how quickly homes went under contract and annual price growth in 2016.
In Factoria, 62 percent of homes sold for over asking price and the typical home found a buyer in just seven days.
Let’s pause for a second and realize $15,000 over list is peanuts compared to the $355,000 over list of this week’s top dog overbid on 24th Ave in the Parkside. Just sayin’…
Looking into my crystal ball I see another year of strong market performance in and around San Francisco, especially for single family homes under $1,500,000, and any property well located, well marketed, and well priced, in any one of the ridiculously popular San Francisco neighborhoods. Expect Oakland to continue to steal buyers from San Francisco, and look to the Red State refugees seeking asylum in California thanks to our strong economy, open-mindedness, innovation, environmental progress, and general awesomeness to keep California great and our markets strong.
Keep praying for snow, rain, the end of our drought, and a smooth transition from democracy to communism. Call me if you need a hug.
Happy New Year!
To see recent sales in your area (including whether they sold over or under, and by how much) check out The Goods’ Recent Sales Page…because I love ya.