Get ready for the redux!
Déjà Vu
Just one month into this new year, activity typically not seen until halfway thru Q1 is already shaking the market from its winter slumber. Indeed, there is a optimism among home buyers that hasn’t been seen in years.
› Open house traffic is up considerably from just weeks ago. This is especially true at properties in entry- and mid-level price points where agents are seeing 20, 30, 50 or more buyers coming by on a weekend afternoon.
› Offer dates are back, and sellers who execute them well are succeeding. Almost one-third of listings that came on the market in January found buyers and were Pending Sale in an average 11 days.
› Buyers making pre-emptive offers are scooping up properties fast. Getting in front of an offer date and presenting a purchase agreement too good to refuse (i.e. better than what a seller believes the market will deliver), suggests a bullishness toward property values.
› Listings canceled during the holidays are returning with zero days on market. Some are accompanied by adjusted pricing, some are not. Now they’re selling, as are older listings that have languished, and others not publicly advertised in new construction buildings.
› If a listing has an offer date, the winning bidder should expect to pay more than the list price and — in many cases — more than any comps support. That’s the nature of operating in a rising market.
After 553 days on market, the Penthouse at 2000 Washington Street found a buyer. It had been listed for as much as $25 million and was reduced to $19.9 million in October 2022. It sold this month for $16 million.
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Driving The Shift
Mortgage interest rates have improved in recent months. Since late October, the benchmark 30-year fixed rate has dropped more than 100 basis points from almost 8% to the mid-6% range. It appears stabilized at this level, at least until the Fed may cut rates in Q2. Borrowers who accept this new normal are making the most of having relatively more purchasing power.
Limited housing inventory is not going away any time soon. Oversized demand will push prices higher, and more sellers will come out to play. For buyers, this positive feedback loop and confidence in a market on the up and up brings more choices, but also more competition. It means waiting to buy is a surefire way to pay more for the same property.
The Numbers
Today’s home prices are, of course, not insignificant. And it is probable that they will be hitting fresh record highs by mid-2025. In fact, another run-up comparable to 2012-2020 and growth cycles before it could well put San Francisco’s Median Sales Price at almost $3 million!
› New Listings (517) in January changed exactly 0.0% from last year. That number is on par for a rising market; New Listings averaged 521 units for the month between 2012 and 2020. To be expected, many would-be sellers who purchased within the past 5-7 years are waiting to list until values reach such a point they may recoup their investment.
› While sellers hold out for better days ahead, home buyers are returning from the sidelines as mortgage interest rates hover near the lowest levels since last spring. Pending Sales (298) jumped 39.9% in January from a year ago; that figure is consistent with the month’s average of 291 units between 2012 to 2020.
› Here’s where it gets more interesting. January ended with just 755 Active Listings, a 19.8% drop year-over-year. For comparison, the month averaged 923 homes for sale from 2012 to 2020. Moreover, approximately half of current Active Listings are carryovers from last year that the market has already passed.
› Properties that were listed before the holiday season are being absorbed, inflating the average time to sell to a staggering high 71 Days On Market. But the 158 units that appeared as New Listings and went under contract last month averaged just 11 days before Pending. Twenty-two of those were Pending, Closed or Sold Off Market at 0 days.
› Increasing competition among buyers for the best-positioned properties is pushing prices higher. The citywide Median Sales Price is now $1,300,000, up 7.2% year-over-year. It far exceeds recent gains experienced in September 2022 (+0.7%) and August 2022 (+4.7%). Typically, January’s median is the lowest of the year during growth cycles.
Ready To Make Your Move?
CONSULT WITH A LOCAL LENDER AND OBTAIN PRE-APPROVAL
› This is essential before making an offer, and can take anywhere from a few days to a week or more. Consider speaking with more than one lender and making them compete for your business. Having your loan file already reviewed by the underwriter will allow you to make a stronger offer. If you plan to stay put in your new home for only a few years, choosing an adjustable-rate product will lower your interest payment. Contact us and we can point you in the right direction.
GET FAMILIAR WITH HOMES FOR SALE AND RECENTLY SOLD
› Homes today are more likely to sell at or near the asking price, but this is by no means a rule. Egregious underpricing is still a common strategy used by sellers and their agents to attract interest (and multiple offers). Be willing to compromise on your wants — if you wait to find the perfect home, you’ll be waiting forever. You can upgrade and personalize a property but you cannot change its location.
COMMIT TO ONE AGENT AND TOUR HOMES TOGETHER
› Let’s talk! There are dozens of off-market and coming soon listings in San Francisco which are not marketed to the public. Properties in San Francisco are not straightforward and value isn’t always obvious. Your agent should always see any property that you may consider purchasing. They should also obtain the seller’s disclosure documents, actually read them, and review them with you as part of your due diligence. Whether you make an offer or not, consider it education.
MAKE THAT OFFER, BABY!
› Buyers today have an opportunity to negotiate price and all sorts of terms. The worst that can happen is that the seller says no. If your offer is not accepted outright, you can try to find middle ground, agree to everything the seller wants, or choose to walk away. In San Francisco, buyers and sellers use a purchase agreement and other standard forms not used outside the city. Working with an experienced agent who knows them inside and out, respects the local customs, and presents a buttoned-up offer on your behalf will give you an advantage.
