I’m sure you have noticed lots of media coverage and party conversations about how crazy busy the current real estate market has become. True — it is like someone turned on the light switch of buyer demand. I am frequently asked, “What happened? How did this take place so quickly and where are these buyers coming from?” There are several reasons for the sudden change.
Having been a full-time Realtor for more than 30 years, this is not the first time I have seen a downturn followed by a remarkable turnaround. Admittedly this one turned around more rapidly than most. One of the reasons is pent-up buyer demand. Homeowners move on average every 4.6 years. Many of these moves were postponed because of the market slowdown that began in 2008. Now the average homeowner has been in his or her home for more than nine years and wants to move. First-time buyers were squeezed out of the market in recent years because, in addition to the difficult economy, lenders tightened lending requirements and qualifications.
There was a lack of confidence in the market during the downturn. However once some buyers began buying, others felt home purchases were safe again and jumped in. With prices climbing and interest rates still at all-time lows, buyers feel this is the time to buy. The market has become super busy seemingly overnight.
The law of supply and demand is also a factor in real estate’s rebound. In addition to low resale inventory, there is an extraordinary lack of new construction. Housing building starts were put on hold when the economy slowed down. In a normal year there are about 1.3 million new homes built each year in the United States. When the economy slowed down, it dropped drastically to 550,000 home starts in 2008, 2009, and 2010. In 2011 home starts began to rise, and we are now at 625,000 – still well below what is needed to cover even the demand for newly established households.
What else is driving the market demand now? Well, there is a lot of money around that is looking for a place to park. We all know banks are paying virtually no interest on deposits, and people remain wary of the stock market. As a result, we are seeing lots of money being invested in real estate. San Francisco real estate in particular has proven to be a good investment over the long run. There is even an increase of foreign money coming here to invest, and some properties are being bought site unseen.
Hill & Co. recently produced a couple of interesting graphs showing San Francisco home values over the years. In 1993 the average single family home was priced at $323,112 and on the market for 73 days. At the height of the market in 2007, the average price was $1,204,167, and the average home was on the market for 41 days. During the recent downturn, our low was in 2011. The average price was $948,399, on the market for 63 days. Today the average home is priced at $1,222,028 on the market for 40 days. Stats are similar for condominiums. Put simply, the losses caused by the downturn have been erased.
So, buyers, get a professional Realtor to work with you to help you find a property and present a winning offer in this competitive marketplace. Sellers, we are above the high market pricing of 2007, so now is an excellent time to put your home on the market if you are considering doing so.