The market is cooling; I repeat the market is cooling! After two and a half years of aggressive bidding over list price, competing with all cash buyers, placing no contingency offers against multiple Buyer’s, the market in “certain locations” appears to be cooling down. About a month ago I started noticing some slowness in areas further from the center of tech, this started in the higher end of home. Now I am here to say that this slowness has now hit much of the Bay Area as well. It is unclear if this is just the combination of the seasonality of increased summer inventory coupled with beautiful summer weather where home buying is less of a priority. Or is it that Buyer’s have simply been priced out or grown weary of this bidding environment. It is also unclear if this is a permanent leveling or if in the fall/winter months we will be back to lower inventory levels and bidding wars we have been used to. Do keep in mind that areas with schools will likely feel the effects a bit later than other locations without this popular requirement.
The macro economy continues to demonstrate a choppy recovery. Job and unemployment numbers seem to be up and down every other month. The trends seem to be upward overall. Janet Yellen our Federal Reserve Chief has been keeping interest rates fixed as she is not seeing a strong enough recovery to raise rates. Mortgage interest rates have dropped slightly from beginning of the year and held steady, about half a percent of what they were in June last year when the rates spiked on Bernake’s statements. The Fed continues to taper back their bond buyback program. Eventually rates will increase naturally as this tapering continues.
A few months back there was a tech scare as there were some fire sales of key technology stocks. This seems to have dissipated as the majority of stocks have recovered. Technology workers continue to dominate hot markets such as San Francisco, Palo Alto, Los Altos, Mountain View and Sunnyvale markets. The Peninsula cities such as Belmont, San Carlos, Redwood City and San Mateo have also been popular destinations for technology workers, as it is a mid point between the jobs in San Francisco and the Southbay.
My listing this week in Redwood Shores although a ton of activity only garnered 1 offer. A Mountain View townhome my Buyer won, yielded 3 Buyers, which is low in this tech heavy town. Another Sunnyvale townhome near Google only had one offer and remains on the market. I’ve seen more properties carry contingencies and Buyer’s have been backing out and transactions have been falling through. Over zealous new home builders are finding that they have less interest especially at the higher price points and offering more incentives than I have seen the past.
On the flip side my listing in Daly City had 9 offers and my Sunnyvale listing had 7 offers. So not all areas are feeling the slow down quite yet. I will continue to monitor this activity and update you as to what I am seeing.
Pending and Sold Home in Q2 2014
Here are some of the transactions that I have been involved in. These will give you more concrete examples of how various areas are performing. This is sorted from the beginning of the quarter to the present.
Pending and Sold Homes for my Customers
- 37000 Meadowbrook Common #202 listing in Fremont sold with 6 offers $23,000 over list price
- 557 Giuffrida Avenue #C, San Jose – This was an example of a home that was a fixer upper and further away from center, but was an opportunity for my client who was willing to do re-modeling work. We got this home $9,950 under list price
- 1002 Marcelli Circle in Los Altos – Client was on the waitlist for quite some time, but was able to get in towards the end of the development. Lovely brand new townhome in the city of Los Altos with excellent school!
- 18 N El Dorado Street in San Mateo is just a quick stroll to downtown. Single family home with a huge lot my Buyer won against 10 offers!
- 428 San Eduardo Terrace in Sunnyvale – My listing in Sunnyvale sold with 7 offers. Sunnyvale remains in high demand due to the proximity to tech companies and prices of Mountain View homes
- 441 Saint Julien Way in Mountain View – My buyer won against 3 competitors. I was surprised how few competitors there were but the offers were still aggressive. Very nicely located property close to Google
- 1832 Rosswood Drive in Cambrian – The first set of Buyer’s fell through on this property and my clients and I were able to get this home against no competition and take advantage. Excellent schools here in Cambrian for an affordable price
- 196 Mirada Drive in Daly City – My listing sold with 9 offers. The high prices in San Francisco are having a halo effect onto Daly City. There were a ton of investors and here I saw international cash buyers re-appear
- 700 Baltic Circle #714 in RedwoodShores, CA, 94065 – My listing in Redwood Shores although quite a bit of interest, I found Buyer’s were hesitant to enter into a bidding situation. We had a strong offer in the end, but many colleagues are seeing similar behaviors on their listings
- 4269 Linwood in Cambrian – Transaction fell through and again my Buyers swooped in under list price for the opportunity
I have been saying in many of my blogs that this overbidding behavior is unsustainable. We may have hit that peak where the market finally agrees with my assessment. It never made a whole lot of sense to me that homes were being overbidded in $100,000 increments over appraisal prices. Buyer’s those of you that have been frustrated with the market, we may have a window of opportunity as we face less competition and maybe able to have some breathing room in contracts. Seller’s if you have been considering selling you may want to do so now in case this is the peak and the market begins to level. We will have to change our pricing strategies and expectations on offer behavior. In short, leveling does not mean that a crash or anything of the like is on the horizon. In fact, leveling is good in my opinion, so we can get some normal home buying and selling behavior. The aspiring economist in me prefers a market in equilibrium rather than highly skewed in either direction.
Thank You For Your Referrals
I wanted to take a moment to thank each and every one of you for your referrals. I have been so blessed to have so many of you advocate for me to your friends and family. It is the driving force for me to work even harder to service you and your friends and family.
Have a wonderful summer and enjoy this beautiful weather!