Up. I’m done.
But you didn’t hear it hear first.
In fact, it seems that there’s an amazingly broad consensus that San Francisco (and Bay Area) prices are heading for sustained gains this year and possibly beyond.
- Michael Krasne, on KQED’s forum, interviews Trulia’s Chief Economist as well as local real estate gurus. They all agree that multiple factors point to strong continuing demand and sustainable measured price increases. You can find the interview here. (Special shout-out to Mike S. for bringing this to my attention.)
- Much the same, earlier this year, from the SF Comical (oh, I mean that venerable rag, the Chronicle), which notes that both rentals and prices continue to rise throughout the Bay Area.
- And earlier this week, Zillow predicted a mere 7.3% increase in SF Metro Area prices. If Zillow defines the SF Metro as broadly as Case Shiller, that number is probably on the low side for San Francisco proper.
What’s driving the increase are the same things that fueled the strong market in 2012:
- Extremely low inventory – there just aren’t a lot of homes on the market.
- Historic low interest rates.
- A relatively robust and diverse economy, with high tech, social media, and biotech all contributing to good local employment and plenty of folks with cash to spend. Did I mention IPO’s?
All of this is confirmed by my own and other agents’ experiences out on the street. It’s a tough time to be a buyer. We are still very much in a market of multiple offers with no contingencies, and where cash is king. A client of mine bidding on a nice $850,000 condo in Potrero Hill condo recently lost out against one of 11 other bids. The winning offer was “well over $900,000” (putting the price per square foot at well over $900), with 40% down in cash, and no financing, appraisal, or inspection contingencies.
For downtown high-rise condo buyers, it’s the same story. No inventory and no new stuff likely to come on to the market for a couple of years. Sellers are naming their price and not negotiating. Comparables (ie. recent sales used by banks to ensure they are not lending too much) are as useful as yesterday’s news. According to an agent at Paragon who specializes in this area, high-rise condo prices may be beginning to look “bubbly.”
If you’re a buyer, preparation, patience, and flexibility, are the operative words. If you’re not a cash buyer, you must have your financing lined up and locked down, and I’m not talking about a pre-approval letter from a standard retail bank. I’m talking about an approval from a lender who has already put you through their complete underwriting process. Patience, because you’re going to lose more than a few bidding wars, before you win. And flexibility because there ain’t no such thing as the perfect house. The broader your parameters, the more likely you won’t just be left standing on the sidelines.