Since the start of 2020, California has experienced one of its hottest housing markets in recent history. Not only are many homes across the state selling at well above the asking price, according to ABC7News.com, they’re also selling at record speeds.
“The recovery has been heavy on housing, because our homes are more important to us than ever before. We’re working out of them. We’re living out of them, etc., and that has created this perfect storm,” said Jordan Levine, vice president and chief economist at the California Association of Realtors.
Levine believes the strength of the housing market is a testament to the state’s robust economy. It also signals a steady desire by aspiring home buyers to live in California, despite the high cost of living and the state’s varied issues.
BUY LOCAL
The same thing has been happening in San Francisco, of course. And while this is good news for sellers, it can make buying a home difficult.
“Right now, both condos and single-family homes are selling well, often in multiple-offer scenarios,” said Marcus Miller, founder and broker at Helm Real Estate. “It’s not unusual to see three to 10 offers on any given property, often over asking, and sometimes well above comparable home sale prices. Also, contingency-free offers are more common now — though brokers will tell you it’s best to always do your due diligence.”
CBS News reported in May that across the country, buying a home is beyond crazy and frustrating. A shortage of places for sale has pushed prices up across the nation by double-digits — and it is pushing house hunters to go to extremes to win bids.
All across the nation, bidding above the asking price is simply the first step in formulating a winning offer. With growing frequency, buyers are offering additional enticements, like waiving inspections for hidden structural problems, or allowing sellers to remain in the home between one to six months after closing — free of rental charges.
Naturally, this surge in prices and demand is bringing back memories of the housing bubble prior to 2006. The painful bursting of that boom, which fed into the Great Recession of 2008, is raising concerns about whether the market is repeating history.
But lending standards are much tighter than they were prior to 2006, according to the CBS News report. Buyers are required to provide tax data, paychecks, and other information to confirm that they can afford a mortgage — all of which decreases the likelihood of a repeat housing crisis.
HOMEBUYING STRATEGIES
Buying a home in San Francisco is even more challenging than elsewhere in the country because the stakes are so high. Homes cost more to begin with, and then on top of that, buyers can suddenly find themselves in fierce bidding wars with wealthy, determined, and anonymous others. For many buyers, this happens over and over again. They make offers on different properties, but never manage to submit the winning bid.
Miller has some strategies for home buyers who want to purchase in the city but also want to avoid this real estate quagmire.
“Look for properties that need work — that require some TLC, or that are being presented so poorly that they are not being looked at by other buyers,” he said. “Sometimes, the marketing and presentation are so bad that buyers who now typically shop for homes first online won’t even come out to see the property. If it goes past 18 days on the market, that may be a good opportunity for you to take a closer look.”
In fact, if a property has been on the market for 21 days or more, Miller suggests buyers have their agents talk with the selling agent to see if there is room in the price — if they are taking “offers as they come.” If yes, tour the property and if the home looks like a good fit, be prepared to write an offer right away.
Last, Miller says if a buyer just loves a specific property and it looks like it’s going to be a competitive situation, try making a preemptive offer — submit an offer prior to the official offer date. While most sellers will want to wait for other offers to be received and reviewed, Miller says a surprising number of sellers don’t want to go through that hassle. He says many preemptive offers are in fact accepted even in this extremely hot market.
Buying a home in the city has never been for the faint of heart. Ironically, a pandemic that once looked like it might soften demand for residential real estate seems instead to have had the opposite effect — across the country, throughout the state, and here in San Francisco.
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