To say that the single-family home market in San Francisco favors sellers is an understatement. Despite continued threats of rising interest rates, disappearing tax incentives and insane overbidding, buyers don’t seem to be deterred.
We’re all operating in an undercurrent of low inventory relative to demand. Simply put, there aren’t enough homes at a variety of price points to go around. More people continue moving to the city, and they’d rather own than rent.
But prospective home buyers are finding that it’s quite expensive to purchase a single-family home here. The average price of a house in the first quarter of 2018 was $1,936,045—up ten percent from Q1 2017. And the list of neighborhoods where you can find a house for $1M or less has dwindled to a handful (specifically, Oceanview, Bayview, Crocker Amazon, Excelsior, Visitacion Valley and Silver Terrace).
Agents and sellers now routinely price homes hundreds of thousands of dollars less than the target price. This is a strategy that’s turned into the norm over the past year. Prospective buyers new to the market are typically unaware of how things work, and it usually takes a few rejected offers before they either step up to the plate or scratch home-buying plans.
Though the average citywide overbid was eleven percent, there were a few hotspots that saw closed sales with overbids of 25% or more—the Central/Outer Sunset, Bernal Heights, Westwood Highlands and Sunnyside.
And let’s not forget my favorite Q1 overbids:
131 Parker | Jordan Park
3BR/1BA, 1400 sq ft
List Price: $1,350,000 Sold: $2,050,000
2319 14th Ave | Golden Gate Heights
2BR/1.5BA, 1300 sq ft
List: $995,000 | Sold: $1,600,000
1326 28th Ave | Central Sunset
3BR/1BA, 1525 sq ft
List: $1,049,000 | Sold: $1,675,000
89 Forest Side | West Portal
2BR/1BA, 1148 sq ft
List: $1,168,000 | Sold: $1,656,000
177 Wawona | West Portal
3BR/3.5BA, 2478 sq ft
List: $2,395,000 | Sold: $3,105,000
3829 25th Street | Noe Valley
3BR/1BA
List: $1,195,000 | Sold: $1,840,000
I think it’s safe to say that our frothy market will last for at least another quarter. So here are some rules of thumb for single-family home buyers and sellers planning to do business in the next few months. (Disclosure: My clients don’t hire me because I tell them what they want to hear. Half the time, I’m like a bucket of cold water. But everyone ends up happy, so trust me when I say that these rules of thumb will save you a lot of heartache.)
Sellers:
Don’t short change your home’s presentation. Spend what it takes to make the property look as good as the comparable sales online, especially the high-flying ones you’re trying to replicate.
Don’t just look at the one or two crazy sales that closed in your area. Review at least a dozen comps so you can get a perspective on the value range of your home.
Many over-the-top sales involve one or two buyers who paid way, way more than everyone else to “win.” Those one or two buyers may or may not come to the party when your house is on the market. Do the best with what you get, and don’t get hung up on your neighbor’s sale from last year.
Buyers:
Know the values. When the renovated Victorian on the north slope of Bernal hits the market for $1.3M, that’s simply code for close to $2M. And all the $995,000 houses in the west part of the city? They translate into $1.3M-$1.5M.
Every contractor and his mother are looking for fixers, and they often pay cash. If you have a loan, need to include contingencies and have a set budget, this may not be the best route to go. Especially when the listing agent is telling your agent that they have 25 disclosure packages out.
Don’t bang your head against the wall. If you’re on track to write more than three offers, it’s time to switch up your strategy. That means changing your criteria, looking at homes that will sell in your range, and maybe coming to terms with the fact that a condo will be more realistic.