In recent months, the booming economy in San Francisco has brought many new buyers to the City. Buyers who had stayed on the sidelines during the downturn tired of waiting for the market to hit bottom and finally began to seriously search for a home. This large group of house hunters entering the market caused the beginning of the 2012 real estate season to get off to a roaring start with low inventory, multiple offers, and sales prices going over
asking price.
Earlier in the year, buyers constantly asked, “Why are the sellers pricing their homes under the market value when that’s not what they will accept?” No amount of explanation seemed to make them feel better or less frustrated.
At this point, none of this is new information, but one thing is new: In the past month, no one has asked me why the price is so low if the seller has no intention of accepting an offer at that price. What I am hearing now is, “How much do we have to pay to buy this home? I want this house!” In fact, buyers seem to be delighted to hear that there are only three or four offers on a home, because they feel they actually have a chance at success.
San Franciscans can no longer feel superior thinking they are special and the demand for housing is limited to our beautiful city. An agent in my office had a well-located remodeled home in Daly City offered at $599,000 (well under market) that received 25 offers and was in contract seven days after coming onto the market. San Francisco agents with San Francisco buyers are turning up all over the Bay Area looking for homes, making offers, and ultimately buyers are making the decision to leave the city.
Not to worry, there are droves of ecstatic renters ready to snap up the freshly vacated apartments, as well as more-ecstatic landlords ready to raise the rent for a new tenant. Landlords with high rents have reported they have had potential renters bid up the rent in their quest to find a new residence and are quite willing to pay “over asking” for monthly rent. Good grief! Where will this all end?
One thing is clear, though: Renters are not moving unless absolutely necessary and sellers are hanging on, even if they plan to sell. Sellers are still waiting for prices to go up. The end result is a continued low inventory of homes on the market, and it looks like this will be the case for some time to come.
Even though some buyers are opting out of San Francisco, sellers do not need to worry that the buyer pool is shrinking. The high demand for rentals plus low interest rates on cash savings has tipped the balance for investors and brought a new group of buyers to the San Francisco residential real estate market. At the beginning of the summer, this new group (and I do mean group) of buyers began visiting my Sunday open houses. These are investors looking to buy small homes or condos to rent. They are not interested in pieds-a-terre or the short-term rental market. These buyers are looking for small rental properties and, even with rent control, they feel San Francisco real estate is a good place to stash their cash. And I do mean cash, because more often than not these investors are cash buyers.
The moral to this story is that the real estate market is in high gear, moving fast and ever-changing. The time has come to sleep with your shoes on if you want to be ready to find a home in San Francisco.
