HOT is the best way to describe our real estate markets, both in San Francisco and Marin. Few listings come onto the market each week and many properties sell within the first day(s) on the market. Many new listings are selling for over the asking price--some for significantly over asking. While the national media, including the Wall Street Journal, is beginning to write about this, we are seeing interesting signs: houses in SF and Marin are selling before they reach the market, a great house in Noe Valley that was well priced received multiple offers and is rumored to be selling for $400,000 over the asking price, homes that failed to sell in the past few years (several that were listed in 2010, again in 2011 and re-listed this winter have sold immediately. And yesterday, clients went to an open house. The listing agent ran out of property statements after handing out about 300. Wow! What's causing this shift in the market? It's likely a few changes.
- Pent Up Demand. Many buyers who wanted to buy were not able to purchase because of low inventory levels in the fall. Great houses that were well priced went into contract quickly in the fall market. Even in December, when activity is often low, we had buyers who faced bidding wars. Add to this the increase we often see in January (Goal for the year--Buy a house!). Don't get me wrong--we still have homes on the market for sale. These are not attractive to buyers for some reason. Often, it is because these houses are significantly over-priced. If the asking price is too high, many buyers won't even try writing a low offer.
- Easing of Lending Rules. I'm not sure if the rules have in fact eased very much. Some banks are offering (or allowing) 80/10/10s--allowing the borrower to obtain a loan for ten percent down. They can borrow 80% for their first loan and borrow 10% as a second loan. In fact, their 10% downpayment can be a combination of the buyers' funds (at least 5% plus a gift). We haven't seen these in years. Although FHA loan regulations are tightening (FHA loans let borrowers put as little as 3.5% down), we still see many buyers in San Francisco and Marin who are paying cash or finding it easy to get loans for their purchases.
- Hot Bay Area Rental Market. Rents are up and vacancies are way down. As tech companies grow and hire more staff, the demand for housing in San Francisco, Marin and the Penninsula has driven up rents in these areas. Some quickly growing companies, like Zynga and Twitter are hiring in the city and its employees are choosing to live in Southern Marin, the City and the Penninsula. So why does this drive home sales? Rents are so high in some popular SF neighborhoods, that the delta between renting and buying has narrowed significantly.
- Increased Confidence. Consumers have heard about the bad market for the past few years. And yet the outlook for many in the Bay Area is positive. In their worlds, they have stable jobs, they notice the growth in their industries. And they recognize that buying is a good long term decision.
- Anticipation of an Even Hotter Market. There is a buzz about upcoming IPOs and growth of other companies. Buyers want to purchase before prices get even higher.