Friday, April 5, 2013

Q1 2013 Real Estate Update

10 Year Anniversary

Next month marks my 10 year anniversary in the business.  As I reflect back at my career and what has happened in the real estate industry in that span, I have worked through 2 booms and 2 downturns.  If I were to name a few key lessons I've learned, I would say first off real estate if treated with the long term perspective in mind, you will generally have an appreciating investment.  However, you also must time your purchases and sales properly in order to maximize your investment at the appropriate times.  For example if you panic and sell in the downturn and in turn panic and buy in an upturn, this strategy most likely won't yield stellar results.  This sounds like common sense, but you would be surprised how many people are unable to capitalize.  Many just follow what's called the "herd mentality."  Real Estate is a hard resilient asset that people always come back to.  The valley is extremely unique because it is supported by our large bay area population, a demographic that values real estate, low supply of livable land and an abundant amount of technology jobs that draw immigrants to the state.  One must have the courage to buy when times are tough and the wisdom to sell when things are good.  Having a long term strategy in place, with an eye for the right market is absolutely key.

Q1 2013 Market Summary

The market has moved into the realm of irrational with multi-offers so aggressive that people are taking to over $100,000 increments in their bidding for a chance to win a home in this market.  My Buyers are extremely frustrated and having a tough time competing against cash buyers (primary home buyers, overseas investors and hedge funds) or buyers with hefty down payments that provide them much headroom for overbidding.  It has been so difficult to deliver this message to my Buyers as I share their dream of home ownership, but without a large sum of cash most simply cannot compete with this level of competition.  Buyers need to be realistic based on their means and evaluate the appropriate strategy that can win in this market.  If not, I have been advising Buyers not to play in this market and wait for a more favorable market.  This market has enough steam for likely another 2 years or more, it is hard to tell.  However, my opinion is that $100,000+ overbids isn't a scalable approach in the long run.

Seller's this is your market so contact me immediately if you would like to sell your home!  The million dollar question is where do I go if I do sell?  This is of course a personalized question so contact me so we can do an analysis of your situation.

Sample of Home Activity

The following are some of the activity that I have encountered in the marketplace.  This will give you a sample of what is going on in the greater market.

- Buyers offered on a San Carlos single family home that sold $300,000 over list price against 22 offers.  An all cash offer is suspected though not confirmed
- Sale pending on a new home development in Dublin.  We came right as the demand uptick caused the builder to increase prices every few days trying to adjust to this new demand.  Congratulations to my Buyers!

- Fremont single family home my clients and I went $50,000 over list and for the first time beat out a cash offer with a strong overall offer!  Congratulations to my Buyers!  First client in history to heed my advice and win on their first offer

- New home development lottery against 11 other Buyers on a particular model.  There were about 150 groups of people out for the lottery for other models
- Buyers offered on a Sunnyvale townhome went for over $120,000 over list price


The market does not seem to be slowing down in the near term.  On the contrary, as predicted Buyers are escalating their behavior in an attempt to beat out of Buyers pushing prices higher and higher.  Cash is king in this market, and I have been advising my clients to have at least 30% to 40% downpayment in order to have room to overbid and buffer for bank appraisals that often come short due to this aggressive market.  Above all things, know yourself and your limits and it maybe wiser to wait this out until the market is more to your advantage.  Seller's you may want to really gauge this market and see if you want to capitalize on this market.

Each person's situation is different, so please contact me for a personalized strategy for your real estate needs.