Originally published March 3, 2014.
Update, March 10, 2014: Turns out, according to Redfin, that the paper of record got a few facts wrong.
“The reporter misquoted us by saying “Redfin estimates that, on average, homes in San Francisco are selling for 60 percent to 80 percent over asking price.”
The quote was corrected and changed to…“Redfin estimates that, on average, 60 percent to 80 percent of San Francisco homes are selling for prices over the original asking price.”
Original:
A piece in the NYT confirms what we already know, but adds some interesting frenzy facts:
Landon Nash, a real estate broker, said it was not uncommon for open houses to see hundreds of people shuffle through and conclude with a 20-person bidding war. People are waiving mortgage contingency clauses and home inspections — and paying cash.
In December, almost 40 percent of the home sales were all cash. Redfin estimates that, on average, homes in San Francisco are selling for 60 percent to 80 percent over asking price. Most are gobbled up within 16 days of being listed, down from 61 days five years ago, when the nation’s real estate market was still soft. READ MORE.
The asking price is random so I’m not sure that any statistic based on that is meaningful.
Some realtors will suggest setting an artificially low asking in order to stimulate viewings and interest. The idea is to create the impression of a frenzy of interest at open houses, in the hope that bidding will drive the price way higher.
In such a circumstance, even if a property did sell for 40% to 60% over asking, that wouldn’t mean so much. The last place I sold went for 35% over asking but of course the asking was just a fiction designed to sucker people in.
Better statistics to use would be “days on market” (DOM), increase in price per square foot, and number of offers.
Incidentally, I have used the same approach for renting places out i.e. advertize the rent low and then invite bids and counter-bids. Let the tenants decide what a place is worth.
It figures but it’s not news for most us.
You are just the typical greedy bottom-feeder. I this..I that…I’m getting over ’cause the market is hot…blah..blah..blah..
Repulsive. Yuck.
Kaliman, I am educating you on how RE works and not asking for your permission.
I think we know how RE works.
You just happen to be so full of yourself.
The repulsive note still stands – you earned it.
Any idea when the last post of yours did not contain a personal attack?
Must be months ago.
If you get this angry every time you encounter an opinion you don’t agree with, your life must be one of perpetual distress. You have my sympathy.
Any comment to make on the topic?
It’s misleading to blame tech for the current buoyancy in the RE market because demand is across the board. Tech workers still comprise less than 10% of the local population so they alone cannot be sustaining the demand. There are also lawyers, doctors, bankers, fund managers, management consultants and other knowledge workers.
The article is fair because towards the end it explains how the real problem has been the city’s land use policies and how they have led to housing supply not keeping up with demand. We’re building more now but it still isn’t enough. We need to build higher, at least in the eastern parts of the city where infrastructure is the most comprehensive.
Meanwhile, there are approaching 200,000 homeowners in SF, and they are able to finance their retirement by selling off their modest homes for seven figures. And of course that group includes the very same people who drafted our land use policies. Coincidence?
You’re right, it’s not all techies.
There’s also hedge fund speculation, private equity, REITS, Chinese capital flight, AirBnB pirates, and your basic mom n pop flipper.
New home creation is at or near all-time lows. Most non-speculative home purchases are zero sum exchanges.
Lots of demand, but it’s heavily speculative, extractive, and unsustainable.
2B- ya shoulda brought in 2009-10 when ya had the chance. Damn, missed again!
I wouldn’t say that SF RE inflation is unsustainable because it has been going on for decades. Even the sub-prime problems of 2008 only caused what might now be seen as a blip in the relentless rise of home values. While RE prices in Oakland fell by a third or a half, in SF we maybe saw 10% in the good areas, at the most.
If you read the article, you will have seen that 40% of SF home buyers are paying all cash. If it were speculation, as you claim, we’d be seeing excessive borrowing and we are not.
In that sense, this escalation in RE prices is much more sustainable that what we saw up until 2007.
As usual, you have it totally backwards.
Not all all-cash buyers are speculators, but most speculators are all-cash.
it’s the first-home buyers who need a mortgage, and first-time buyers are what drive all healthy markets. Now, first-time buyers make up a historic low percentage of the market.
2Beers, where is your evidence that speculators don’t use leverage? That’s certainly not my experience.
In any event, realtors generally know who is buying and I am mostly hearing from them that most of the home purchases in SF right now are by owner-occupiers.
There are some buildings bought to be rehabbed or expanded, but they are usually of a specific type e.g. multi-units with under-paying tenants or a small, old home on a large lot that can be torn down.
Many first-time buyers in Sf are all-cash because they make their money quicker these days. A twenty-something with a few million from stock options is routine.
Do you have a job dude? Seriously? All you do is comment on this crap all day like some local Limbaugh or something.