Where Have All The Houses Gone?

San Francisco housing inventory is at a remarkable low, making buyers anxious. Could this cloud have its own silver linings playbook?

Photo by: Zillow With San Francisco's low housing inventory, homes are selling for thousands – sometimes hundreds of thousands – above their asking prices. Example: This renovated Victorian at 1357 Masonic Avenue, listed for $1.35 million on Feb 1. 2013, and sold for $1.6 million on Feb. 27, 2013.

Aspiring homebuyers have been hoping to take advantage of low interest rates and an economic uptick to finally get out of the dismal rental market in San Francisco, where a "bargain" is a 2-bedroom apartment with no parking space and a whopping 390 square feet of living space for $2,000 a month, and a normal-sized 2-bedroom in a non-fancy neighborhood is $4,500.

But there's a problem with that plan. There was a dearth of available inventory at the start of the year, but that's to be expected: traditionally, Superbowl Sunday is the unofficial kickoff of house-buying season. And yet ... the expected homes have most definitely not come on the market. This February saw 40 percent fewer homes for sale in San Francisco than one year earlier, making it the fourth steepest drop across the country. The result? Modest homes in modest neighborhoods going for thousands – sometimes a hundred thousand – above their asking price.

Why the shortage? There are several reasons, according to industry experts: there are fewer foreclosures on the market because California has been able to unload them quickly – they settle out of court, which apparently makes a difference. So the available houses are allegedly better quality, though last weekend's open houses were less than impressive in the "needs freshening" department.

This may not be quite as bad as it sounds. "Everyone knows it's a seller's market right now," says Alex Hachiya of Sotheby's International Realty. "So people are selling because they want to, not because they have to. We see fewer distressed sales, and the sales go through much more quickly." That is, without a sea of un-sellable houses bloating up the numbers of available inventory, the numbers are lean, but every single house is worth buying. It's quality versus quantity.

To a nail-biting contender, the semantics of the situation don't help: they want to know how much to bid, and waiting to hear back from real-estate agents overwhelmed by all the sudden attention is worse than waiting to hear back from the public-school lottery. Here's hoping there's a few good houses for hopeful buyers in the coming weeks.

Zillow Real Estate Search

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