In the Bay Area housing market, it appears to be a game of cat and mouse.
Sales of single-family homes in August crept up ever so slightly from the year before as many buyers took a wait-and-see attitude, challenging sellers to negotiate — something unheard of in the overheated market of 2015.
Could a price break be coming to the region after years of steady appreciation? Perhaps.
“Outside hotly contested areas, we’re seeing price adjustments of a kind we haven’t seen in some time,” said Timothy Ambrose, treasurer of the Bay East Association of Realtors. “Buyers start thinking, ‘Well, should I wait?’”
But hang on, he and other experts warned. The regional market is a complicated one, with techies still driving up home prices in micromarkets from Palo Alto to Oakland’s Rockridge neighborhood. And this wouldn’t be the first time the overall market has slowed in late summer, as children go back to school and families call off their house hunts.
The Silicon Valley market is unpredictable, said Pacific Union agent Wendy Kandasamy, based in Palo Alto: “The market is so dynamic. It’s hard to say with certainty when a property will sell.”
She called August — typically the doldrums for home sales — an anomaly, ticking off details of five sales for $5 million and up. One five-bedroom house in Palo Alto sold for $7,795,000 — almost $1,900 per square foot, a figure Kandasamy called “extraordinary.”
Yet in lower price brackets, she said, buyers have backed off and sellers find themselves negotiating.
Her client Clifford Chao can attest to that. A Google engineer, he and his wife, Jackie Ling-Chao, who also works in tech, spent months house hunting. With one young child and another on the way, they wanted something larger than their downtown Mountain View condominium.
Initially they set their budget between $1.8 and $1.9 million, but that wasn’t getting them the house they wanted in a top school district. So they decided to stretch the budget. “It’d be painful, but we could,” Chao said.
And then the unexpected occurred: He noticed that “certain houses that should be getting 10 offers suddenly couldn’t sell. It was only happening in this one price range of between $2.1 and $2.4 million. Everything seemed to tumble, sometimes by about 10 percent.”
The couple watched, waited and successfully bid on an Eichler-style home in Palo Alto: four bedrooms with a spacious backyard on a 7,000-square-foot lot. It listed for $2.3 million. After a previous buyer backed out of a deal, Chao and his wife grabbed it for $2.17 million.
“I think we did get a little bit lucky,” he said. “It’s what we wanted — perfect.”
Alain Pinel agent Mark Wong also finds the market to be mixed. On the one hand, he identified six homes that sold last month in Cupertino for between $200,000 and $417,000 over the asking price, the latter example attracting 23 offers. Yet such bidding battles are no longer the rule, and with the market’s long-range prospects unknowable, he has advised some clients to get off the fence.
His clients Shue Pun, a marriage and family therapist, and her husband, Heman, a graphic artist, decided to sell their Cupertino townhouse, where they lived for 13 years and raised their son, who now works in Southern California. The townhouse is in an excellent school district, but sits on a busy street — part commercial, part residential — and Wong told them it likely wouldn’t sell for the $1.2 million or so that they had anticipated.
Listing it for just under $1.1 million, they held an open house that attracted 110 visitors — but no offers. “A real disappointment,” Shue said.
But a few weeks later, a couple with two young children — “a perfect fit” — bid $1.05 million. The Puns, who purchased the townhouse 13 years ago for $520,000, accepted the offer and now plan to buy a house in San Jose, close to their church.
Like the Bay Area weather, the region’s real estate market varies from town to town and neighborhood to neighborhood, said William Doerlich, president-elect of the Bay East Association of Realtors. He estimated that upward of 50 percent of his clients work in tech.
“They’re tired of the $4,500 apartment in Potrero Hill” in San Francisco, Doerlich said, so they move to the East Bay, preferably close to BART and in a “walkable” district, and they “gobble up” houses, whether in Oakland or Dublin.
Or in Fremont, where his client Erin Suth — unwilling to go along with $1,300 in monthly rent for her 480-square-foot apartment in Castro Valley — found an old cottage house on a spacious lot. Built in 1924, it was completely renovated: new plumbing, new granite counters in the kitchen, a flagstone front porch. It listed for $430,000.
Suth, who is 26 and a regional manager for a recruiting company — not even a techie — bid $450,000 and now owns her first house. “It’s darling,” she said.
As you can see in the video, the house was all original from 1941. There was a deliberate attempt by the trustee and agent to price-in the condition, and select a list price towards the bottom of the range.
This is the type of neighborhood that can vary block to block, depending on upgrades – so you’d like to have comps within a block or two, ideally. The most recent comp on the block was the $685,000 for a 4br/2ba, 2,114sf house across the street that closed in April, 2015:
(the $707,000 is a pre-foreclosure)
There were others further away in the $600,000s, so starting with an attractive list price of $624,999 made sense (the subject property is green dot on map).
The half-hour open house took place on a Sunday, and bidders had until Wednesday to submit their offer.
18 offers were received, and six were all-cash!
The cash offers were asked for their highest and best, and not one but TWO offers of $730,000 were submitted – one was from the next-door neighbor! But his agent struggled with the paperwork, and there was some mis-direction too. But the other buyer had made the best initial offer of $725,500, and had upped it to $730,000 just to add a little extra mustard.
With the identical cash offers and both with short escrow periods, it came down to the agent – who best had their act together. The neighbor didn’t get it – which could lead to some frosty conversation over the hedge!
Seven days later, the escrow closed at $730,000 as-is (no repairs requested).
It shows the power of the auction format, and how turning the sales process into a competition gets buyers fired up about winning – usually at all costs!
Two cash buyers were willing to pay more than $100,000 over list!
The good things that happened to assist:
There was one comp at $740,000.
It must have been a fair competition.
Prices are going up so fast in these older but quality neighborhoods that it feels like a runaway train to buyers, and they are desperate to grab anything.
But more than anything, it shows that with a good agent and a proper bidding process, it makes sense to put an attractive price on it. If they would have listed for $729,000, they would still be sitting there!
After enjoying the content of the first couple of dozen listings, I decided to turn on the camera and let you see what it is like being me – or any other agent out there who works with buyers. P.S. The price point doesn’t matter – this is what it’s like. I forgot to cut the first 5 seconds:
The low-inventory conditions have several contributing factors, one of which is the Prop 13 cap on property taxes. The long-time owners sure don’t want to pay what would be much-higher taxes if they move up, thus the turnover has slowed considerably:
Moving down, price-wise, to keep your old tax basis isn’t easy either. Though this graph shows that twice as many people would move if they could take their tax benefits with them, it’s not enough to get older people to sell. By the time you are 65, the chance of you selling is less than 4%, and that’s with the tax benefits transferring:
Move before you get old!
Here is the big concern – how many younger folks are coming up that are ready, willing, and able to buy your house for what you think it is worth today?
Your house comes with a stifling property-tax bill, and fewer are going for it:
The residual effects of prop 13, combined with the high federal and state income taxes paid on the profit above $500,000 will cause fewer and fewer long-timers to want to sell. Eventually, it means the inventory will be stocked with estate sales and sellers who NEED to sell.
The inventory dropped across the board this week, but it still feels bloated – the decline was only 1.7%, leaving 1,072 houses for sale.
Anyone who has their house priced on the higher-end and has been trying to sell for months should cancel and wait until next year so we can focus on the sellers who want and need to sell for what the market will bear.
At least then we would have some certainty about market value – with hundreds of listings lying around not selling, we really don’t know anything except what they aren’t worth.
(There are 523 NSDCC active listings priced above $2,000,000, and 45 have sold in the last 30 days).
Click on the ‘Read More’ link below for the NSDCC active-inventory data:
When you’ve decided to sell your home, the last thing you want to do is spend money to spruce the place up. After all, whoever buys it is going to replace those outdated kitchen cabinets and grungy bathroom tiles anyway, right?
“We’re often asked why any money should be spent freshening,” said Mickey Conlon, an associate broker with Douglas Elliman Real Estate. “The answer has to do with the psychological effect of assessing a renovation on a prospective purchase. Buyers assign dollar values to repairs that typically exceed the actual cost of remediation.”
To get the best return on your investment — and avoid turning off potential buyers — you need to ensure your home looks its best when it hits the market. At the same time, you don’t want to waste effort or money on improvements that won’t pay off.
The iPhone 7 is out! Smart phones and other mobile devices now dominate the landscape, and are practically part of the family. Thankfully, they don’t need their own bedroom and bath!
Most people scroll so quickly that they only take split-seconds to decide which homes to consider. Having limited inventory might be a good thing!
The first impression of the home needs to be incredible just to capture their attention for a few seconds.
Home Selling in the Mobile-Device Era
Staging – The photos are already small enough on these phones – they become much more appealing with the right decor. Once the buyers arrive for their minutes-long tour, it’s easier for them to visualize too.
Pro Photos Only – Buyers are frustrated enough, and they won’t tolerate poor-quality photos. It’s too easy for them to keep swiping.
Colors need to be current. In the minds of fast-moving buyers, out-of-style colors = fixer.
Powerful Remarks – Listings with the usual mumbo-jumbo in the remarks won’t get read.
Responding to Inquires – Zillow recommends that agents respond to inquiries within five minutes – otherwise, consumers will forget the property!
Comps – Buyers are moving (too) fast, and there aren’t as many sales so it’s tougher to track the values easily. Give them a hand – list the comps in the remarks!
Sell with Less – Don’t include 25 photos of beddings and local attractions.
Old Listings are Toast – Buyers ignore old listings – they want new meat.
This is the era of sensory overload. There are so many advertising images coming at us every second that our go-to is to ignore first. But those clear, clean, sleek, easy-to-read listings with great photos and an attractive price still have a good chance of selling!
Energy enters your home at the front door, so invite it in! Make your door stand out by painting it a color that contrasts with your home, adding a new welcome mat and flanking the door with plants. Choose plants with rounded leaves as sharp leaves can appear aggressive to buyers.
Remove the Clutter
An orderly space with no clutter is the best feng shui foundation for your home. And don’t drag your clutter from your old home to your new home – deal with it before moving into the new home.
Create a “Room of First Impression”
Buyers generally decide whether they will buy a home in the first eight seconds they spend there, so you want them to see the best room first. Create a clear path to this room with a runner rug or with eye-catching art and accessories.
Don’t Let Energy Go Down the Drain
If the first thing buyers see when they enter your home is a bathroom, keep the bathroom door closed. Toilets and drains take energy from a room, so keep the toilet lid down and cover drains while not in use. You can also place a small tabletop water fountain either at the entrance or in the back left corner of the home, which is the wealth corner. Moving water circulates prosperity energy throughout the home.
Rearrange Furniture to Improve Chi
A furniture arrangement can make or break the flow of energy in the room. If the back of a sofa faces the room’s entrance, energy bounces right out. Facing a comfortable sofa or love seat toward the entrance of the room will improve energy flow and make buyers feel welcome.
Invigorate the Senses
Stimulate your home’s energy with sound by adding a wind chime to the front right corner of your house. This is the buyer’s area of the home, so this accessory might call in your home’s future owner.
Pack Up the Family Photos and Religious Items
You want to make your home as welcoming as possible to potential buyers … don’t distract them with personal effects. Nature scenes are soothing and will relax the buyers.
Have you let go of the house?
Walk room by room through the house and mentally say “thank you” for the good — and bad — times you had there.
Picture yourself holding the house, presenting it as a gift to the next owner.
Start packing. “It starts getting the energy moving” and releases “your hold on the house,” Kennedy says. Plus, packing away your personal items is a good way to lose the “It’s my house, not yours” vibe.
Your basic sense of security is facing one of the biggest challenges in life – you are moving everything about you down the road. Don’t take it lightly.
Making Way for Auspicious Feng Shui Chi
Now, it is time to ensure the new incoming chi is auspicious. Open the windows, turn on the fans, and let the sunlight in. You want fresh air and positivity coming into your home. Be in good spirits.
Go for Good Energy
Most importantly, be aware of the very important feng shui energy triangle when getting ready to sell your house. The energy in the kitchen, the bathroom, and the bedroom is either making or breaking the house sale. Buyers need to know they will sleep well, eat well, and well, unwind well if they choose to buy your home.
If you really want feng shui on your side when selling your home, read this:
Our local market has been healthy/strong since 2009, with virtually every property in North San Diego’s Coastal region having risen 30% to 50% in value.
But the slowdown is here, which probably means prices are going to flatten out.
Sellers and agents who priced too high over the last few years just had to wait “until some nice family came along”. But the reality was prices were rising fast enough that they eventually caught up.
But what happens in flatsville? Prices take much longer to catch up – if they ever do. With mortgage rates at record low levels – can market conditions be any better than what we’ve seen lately? Probably not.
The days-on-market is going to matter now.
Buyers have been willing to ignore the longer DOMs because they knew prices were rising fast – and they were frustrated. But in a slower market, buyers gain confidence and don’t mind waiting to see how it all shakes out.
Bottom line?
You want to sell in the first 30 days on the market.
The pricing history of each house, and the amount of time it’s been on the market is public knowledge. Once you roll into flatsville, the homes languishing on the market for months will get ignored. Buyers are more skeptical, and the longer a house is on the market, the less they want to pay!
Other things will matter too. Curb appeal and interior improvements, ease of showing, reputable listing agent, and attractive price will all be scrutinized closely by prospective purchasers who are looking for any reason NOT to buy. Staying on the fence will become the new sport.
Is it a big deal? Not to those who don’t need to sell. Buyers will still come around, and you might get lucky.
But rising prices have been provided the ‘luck’ because they caused buyers to ignore market signals – they just wanted to buy something before it got worse.
The shift in the market is subtle, and many won’t notice.
But the educated buyers are paying attention, and now hesitating over the little stuff. The number of days on the market will be their primary data point, so do everything possible to ensure a prompt sale!
