SF Homes Are Selling for Way Over Asking
This town always has to stand out from the crowd. As the rest of the country struggles with a sluggish housing market, homes in the Bay Area are still flying off the shelves. What's San Francisco's secret?
A recent post on Curbed SF turned out to be a false alarm, but the headline still freaks everyone out: A Noe Valley two-bedroom house was reported to have sold for 77% over the asking price. In reality, it was a much more normal 12% over asking, but what's interesting is how believable it was. People shared it around Facebook, saying things like "Wow, this market is nutso-cuckoo." But unbelievable? Nope.
In fact, according to Jeff Salgado, a top producer in McGuire Real Estate's Noe Valley office, "We do see sales almost 40% over asking, and the average hovers around 10% over asking. We're averaging roughly $885 per square foot."
When you think of how things are going around the country — picking up, but slowly, with homes tending to go for their asking price — San Francisco once again looks like a city of weirdoes, with homes selling before they hit the market and seasoned homebuyers perfectly willing to believe a crazy headline.
"Think about it," Salgado says, pointing to the median prices in the Bay Area. "Just the overbid on a $1.4 million home is the amount people would pay for their entire home in most places."
(Take a moment and let that sink in. Because it's mind-boggling. The median home price here is $1 million. The median home price in Chicago is $220,000. Ten percent over asking on a million-dollar home is $100,000. Ouch.)
What makes the real estate sales market so strong here? "We continue to see low inventory," says Salgado. "Usually the inventory fluctuates with the season, but this has been true in every month of the year so far." Plus, "You have a large pool of motivated and qualified buyers created by the high-tech and biotech industries: Silicon Valley is the engine that's driving this bus."
There's also pressure to sell quickly, so smart sellers are starting at a lower price to entice more buyers. Like fish and houseguests, San Francisco listings start to stink if they stick around too long. "The kiss of death is stale real estate. Everyone knows homes are selling fast," says Salgado. "So if you're on the MLS for more than 14 days, people start imagining that something must be wrong with it."
Which in turn motivates people to price their properties low. "It may seem counterintuitive in this market," Salgado says. "A seller might look at the comps in her area and say, 'This place went for X, and mine is much nicer, so I will price mine higher.' But that X price is what it sold for in the end. When people set up their searches, they correct for the probable sales price, and don't bother looking at listings at the top of their range; they know they will have to bid 10% more to be competitive, so they only go see homes well below their top number." So if you price your home too high, you'll lose out on everyone who would bid your asking price.
But what happens if you bid way over, and the bank won't finance that amount? It's been known to happen. But that's mostly outside the actual city, says Salgado. "Within San Francisco, houses are being appraised at what they've sold for. And buyers are willing to put more down to take a smaller loan, because real estate is still the most attractive place to put your money these days."
"This is the strongest market I have ever seen," adds Salgado. But the difference is, there are no more funny mortgage loans. People are either paying cash or they're extremely well qualified and will have the money to ride this out no matter what happens to the market."
So: 77% over asking? Not yet. Forty percent over asking? Totally possible. And 10% over asking? If you're a buyer, you'd better count on it. Good luck, shoppers!