San Francisco Real Estate Managing Broker's Blog

Warren Buffett

When billionaire Warren Buffett talks, people listen. And lately the Oracle of Omaha has been talking a lot about real estate and why now is the right time to be investing in housing. In fact, Buffett went so far in an interview on CNBC’s “Squawk Box” as to say that he’d “buy up a couple hundred thousand” single-family homes if it was practical for him to do so.

Buffett said he believes purchasing a home with today’s historically low mortgage interest rates and holding it for the long-term has actually become a better investment than stocks right now. This, from someone who has always put stocks above all other investments. In his annual letter to shareowners, Buffett wrote, “Housing will come back, you can be sure of that.”

In explaining his investment picks and pans, Buffett said he would shy away from gold and treasuries, the latter of which he said will not keep up with inflation, particularly after taxes. Instead he said he prefers to put his money into investments that he considered to be “productive assets.” Within this category are stocks and real estate.

According to the Buffett, real estate and stocks not only boast the greatest upside potential, but also are safer investments in the long run than treasuries and gold.

In a recent interview with the International Business Times, Buffett forecasted an increase in household formations as the economy continues to recover. He believes that more people who moved in with their parents or in-laws during the recession will soon look to move out and get their own home soon. 

According to the International Business Times, the annual pace of housing starts in the U.S. last year was just 609,000 – far less than the household formation of 1.14 million. Eventually, this imbalance will absorb the oversupply in the housing market, Buffett said, although how long this process takes could vary widely among various local U.S. housing markets. “Demographics and our market system will restore the needed balance – probably before long,” he said.  No one knows for sure what the future holds, but I agree wholeheartedly that if you’re looking to invest in a home for the long term you couldn’t find a better time.

On a related note, sales of existing single-family homes in the Bay Area increased by 10.7 percent in February compared with a year ago, according to a report released Friday by DataQuick, the La Jolla-based real estate information firm.

This marked the biggest increase for February in five years, according to DataQuick, and the eighth straight month of year-over-year sales increases for the Bay Area.

One last item of interest:  Remember just a year and a half ago when consumption and spending seemed to be at an all-time low?  There were articles appearing about a possible trend in Renting versus Buying.  Well just two weeks ago, The San Francisco Business Times took a poll, asking readers if “renting is the new American Dream.” Despite the challenging housing market in recent years, homeownership still won by a wide margin. Some things never change! Here’s a copy:

Below is a market-by-market report from our local offices:

North Bay – Multiple offers are the new normal right now, our Greenbrae office reports.  Agents are experiencing an increase in buyer activity there continues to be a severe shortage of inventory – two month’s supply in Marin.  Inventory is half of what it was this time last year and the year before. Our Sebastopol manager can’t remember a time when there was so little inventory available. If it’s in good condition and priced appropriately it will sell and probably with multiple offers. Activity is holding steady at open houses in Southern Marin. Our local manager says agents are seeing about the same number of units sold to date versus year ago in Mill Valley, but a 44% increase in Tiburon and a 38% increase in Sausalito.  A severe lack of inventory is the biggest challenge currently, as there is far more demand than supply.

San Francisco – The weekly broker’s tour volume is about 1/3 of what it was last year, our Lakeside manager reports.  Buyers are frustrated and agents are feeling desperate because for every multiple offer situation there is 1 winner and 6-10 missed sales.  Yet sellers are not responding with new listings; some of them are stuck with no equity and don’t have cash to move even though they want to.  Yet interest rates remain low and home affordability is terrific compared to past years.  Most important is that buyers do everything they can to get the house they want so they don’t have to continue the process. It’s the same story for our Lombard office: everything is dominated by a lack of inventory. Stale listings are selling, sales in one day, 17 offers on a fixer, most probates being overbid, heavy open traffic, frustrated buyers, off-market pre-emptive sales, cash deals winning the bidding. Great time to list! According to our Sunset office, the very few listings on the market are selling quickly and with the majority of them receiving multiple offers.  A condo listing in SOMA that was listed 12 months ago and did not sell came back on the market with a higher listed price (5%) and sold within a week at over asking.

SF Peninsula — Sales activity is on the rise, according to our Burlingame office. There is a definite positive attitude in the buyer’s market. Five to seven offers on Burlingame, San Mateo, Belmont and San Carlos properties are becoming the norm. Buyers are waiving contingencies and appraisals after going through four or five tries to buy a property and losing out. There are also a lot of cash buyers, which adds to the frustration of those trying to buy with conventional financing. The luxury end of the market is also picking up.  We are seeing the early Facebook/tech company etc. buyers coming to Hillsborough and in most cases making cash purchases. Our Half Moon Bay office says agents are enjoying the overflow from the Peninsula with all their multiple offers. This overheated market continues to be short on inventory and long on buyers, our Menlo Park manager reports.  All the buyers who have been ‘sitting on the fence’ for the past 18 months have now all jumped off at the same time.  Our manager compares it to stock market anticipation. “In 3 months, great corporate earnings are coming out, Apple is going to launch their new IPad and great employment numbers are coming out – all anticipation.”  Like the old saying – Buy on rumor and sell on news. In Palo Alto, extraordinarily low inventory is resulting in numerous multiple offers.  It’s a very frustrating market for buyers and agents alike.    Woodside and Portola Valley are not experiencing the frenzied activity that we are seeing in Palo Alto and Menlo Park.  Price points are higher and sales are slower. The higher the price, the more cautious the buyer.  Many younger buyers want more unban, close to town and transportation locales. Our Redwood City manager says the few open houses in the area had had an amazing amount of people through. San Carlos properties are selling very quickly usually with multiple offers. Redwood City seems to take a little longer but if priced correctly in a good location homes are also getting multiple offers but usually not as many. Belmont inventory is also low but again if priced right in a good location they are also selling. The main drive seems to be affordable money and lack of inventory. Our San Mateo manager says inventory levels are dropping lower and lower.  Buyers are out there as multiple offers indicate. The high-end market is also improving.

East Bay – Buyers are out in force in Berkeley and hungry for attractive homes, priced right and in nice neighborhoods.  Our local manager said there were more than 200 visitors to last Sunday’s open house on just this kind of property.   We hope homeowners/sellers begin to notice, she said. The Livermore real estate market in 2012 has been very strong.  Active listings in Livermore are down 42% year over year while pending sales are up 18% compared to the same time last year.  Closed sales in Livermore for February 2012 were up 53% compared to February 2012.  Multiple offers are common, but homes with location issues are still getting multiple offers, although below asking price.  Our Oakland/Piedmont manager says it has been mostly multiple offer situations for the agents in her office both on the listing and the buyer side. More back-up offers are being agreed to due to the lack of inventory in Oakland, Alameda, and Berkeley areas. She doesn’t see any easing any time soon as agents who are attempting to get more listings to market are not always successful in speeding up their client’s timetable. Our Orinda manager reports that buyers are very active and open homes are heavily attended. Most sales are multiple offers with buyers making many concessions (paying transfer tax, paying home warranty, etc.). In Walnut Creek, new listings are flying off the market with double digit multiple offers, which are making final prices over asking.  Inventory is still low.  We are also seeing cash buyers more frequently.  Buyers are ready to go.  Sellers seem to be more ready to list.

Silicon Valley – It is remarkably busy out there, our Cupertino manager reports. Buyers appear to be desperate to get houses. Buyers are snapping up the new listings of single-family homes in good school districts, our Los Altos manager says. And the $2 million-plus market is getting stronger. The Los Gatos area market continues to heat up with multiple offers increasing.  Our office had a $2.1 million dollar property listed on the MLS last year for 90 days that did not sell.  The seller re-listed the property with our office this year and received multiple offers and it will close escrow over list price.  What a difference a year makes! The Saratoga market is red hot. Most properties have anywhere from 5 to 15 offers presented. Many properties with multiple offers are selling well over 10% over the listing price. The winning offers tend to be all cash offers, with no contingencies and with very quick closings. 

South County – Morgan Hill is just a little drive south from the booming Silicon Valley.  The expectation of our local agents is that those potential buyers who are seeking more for their “real estate dollar” will venture to South Valley.  This phenomenon has actually started, our Morgan Hill manager says. Agents are reporting that some buyers are being priced out of the market in San Jose, Mt. View, and Sunnyvale and are discovering better value in South Valley.   Recently a Morgan Hill agent listed a Mt. View home for $1.4 million dollars (1400 square feet) and is expecting multiple offers—those sellers will come to Morgan Hill and buy a comparable home for about $600,000.   It seems that “optimism” has replaced pessimism and that a renewed energy is running through our industry.   Inventory remains low and buyer interest is high—all good signs that the recovery is on course.

Monterey Peninsula – Sales activity continues to improve, our Monterey Peninsula manager says. There have been 42 ratified offers in recent weeks and many multiple offers, especially in the lower price ranges. Sales are also increasing in the upper end of the market.

It seems like every day I see national headlines decrying the “struggling” housing market and questioning when things will finally turn around. And then I get to work look at reports from our Bay Area offices showing sales jumping and multiple offers for many if not most homes in a number of areas, and I wonder if we’re on the same planet.

The disconnect between the Bay Area housing market and what’s being reported on a national basis is getting stranger every day. In other parts of the country, agents and government officials are trying to figure out creative ways to rid their markets of a huge backlog of housing while buyers show little interest in jumping in to help. Then there’s the Bay Area, where the housing market is just the opposite.

San Francisco Market: In my own office my experience shows the inventory shortage continues and has created an atmosphere verging on panic.  Faced with increasing competition in multiple offers, some buyers are retreating hoping for a quieter time to make their purchase.  Multiple offer competition has become increasingly intense and favoring cash, large down payments and even pre offer inspections.  Yet sellers have not yet responded by providing more product in spite of signs of price increases in certain neighborhoods.  Our agents are continuing to sell homes by scouring stale and expired listings and even finding homes to sell before they come on the market formally.

And, for example, here are a few of the reports this week from my manager colleagues  and agents in the area:

• From our Southern Marin manager: “Multiple offers continue to be the name of the game, but the difference from the past markets is we are now seeing multiple offers in all price ranges, not just REOs and Short Sales.”
•  One $1 million-plus Mill Valley home in Strawberry garnered 11 offers last week, and another priced at $1.35 million had six offers.  Both are rumored to be in contract for almost $300,000 over list price. 
• “Buyers are getting frustrated over not getting the property in multiple offer situations, even when going substantially over the list price.”
• From our Los Altos manager: “We are selling more than we are listing in most price ranges.  We had a healthy increase in the high end this past week with a $12 million and $7 million sale, several sales above $3 million and a dozen over $2 million.”
• “Inventories are at historic lows and the market continues to heat up!”
• From our Walnut Creek manager: “We’re seeing multiple offers on most every listing that comes on the market.   A condo in Walnut Creek received seven all cash offers!”

The same stories are being echoed in all parts of the Bay, from San Francisco and the Peninsula to San Jose to the East Bay, and not just the more expensive markets. Buyers are pounding the pavement, cash in hand and looking for good properties to buy – now, if not sooner. “It’s nuts out there,” said our Cupertino manager. “A third of our sales resulting in multiple offers.”

Given the surging demand for housing you’d think sellers would be rushing to their local brokerage office to list their home, right? Guess again. The inventory of homes for sale is the lowest it has been in years, maybe even a decade, according to long-time industry observers. The result is that buyers are fighting it out for the few homes on the market listed by savvy sellers.

So what’s keeping the other sellers away when homes are going for great prices once again? Three things, two of which could come back to bite sellers who try to time the market:

1.  A misunderstanding of the state of the housing market.

Perhaps they are reading the national headlines and still believe the market is in the doldrums, prices are still going down, and they don’t want to sell at bargain-basement prices. If so, they’re missing an incredible opportunity. We’re having a honest-to-goodness house party with lots of anxious buyers. But somehow, sellers never got their Evite.

2.  They’re waiting for the Facebook IPO.

The thinking goes that once Facebook goes public, hundreds of employees will receive lucrative stock options which – eventually – they will be able to cash after the lockup period and then rush out to bid up prices for local homes.  Wow, talking about betting on the come.

 3.  There is a significant group of sellers who are Price-“Stuck”

Price levels in the SF Bay Area have rebounded to levels seen in 2002-2007 depending on the neighborhood.  Some of homeowners home values are still partially or significantly under water and even though they may have some desire to move, they are not financially capable because of the value of the home they would need to sell in order to move.

I’m not questioning the “Facebook effect” on the Silicon Valley housing market. Far from it, I think it certainly will have some impact on pricing at some point in some communities in the heart of the valley. But this strikes me as something like trying to time the stock market. I don’t know about you, but I’ve never been able to get that right. And I don’t think many others have either.

The fact is that the real estate market has always come down to two simple factors: the law of supply and demand, and consumer confidence. Right now, both of those are telling me it’s a sellers’ market in the Bay Area. Consumers are feeling pretty darn confident as the economy picks up steam and the stock market presses higher. And the scales of supply and demand are tipping heavily in favor of sellers.

Smart, strategic sellers get that, and they’re making their moves now – not six months or a year from now. They’re the ones receiving multiple offers over their asking price because there just isn’t a lot of competition for buyers’ attention. They’re out there now, well before everyone else joins the party, tipping the scales back in favor of buyers once again.

Below are comments from some other markets in our Larger Bay Area from our local offices:

North Bay – Inventory shortages and multiple offers continue to be the order of the day, according to Greenbrae agents.  One agent who held an open house reported non-stop buyers all day long and an offer Monday morning. The client of another agent lost out for the fifth time despite all cash offers. Is it really this hard to buy a home when you’re all cash at $1.5 million?  One property got 11 offers, $200K over asking price.  Our Southern Marin manager reports multiple offers continue to be the name of the game.  One million plus dollar Mill Valley home in Strawberry garnered 11 offers last week, and another priced at $1,350,000 had six offers.  Both are rumored to be in contract for almost $300,000 over list price.   A Tiburon property priced over $2.6 million had five offers.  The difference from the past markets is we are now seeing multiple offers in all price ranges, not just REOs and Short Sales.  Buyers are getting frustrated over not getting the property in multiple offer situations, even when going substantially over the list price. In Northern Marin, our local manager reports that inventory remains low and the market is still hottest in the lower end of the price spectrum.  The median list price is $598,200, and the 122 active properties have been on the market for an average of 122 days (and no, that’s not a typo, just a coincidence).  Buyers are moving aggressively on well-priced properties, with a number of “flipping” companies competing with owner-occupiers – and usually winning any bidding wars, primarily due to the fact that distressed properties are not good candidates for conventional lenders.  These deals are mostly cash. Lady Gaga spotted in Sonoma County taking in the food scene and enjoying the vistas, our Santa Rosa manager reports. There is some talk, unconfirmed, that the 25-year-old singer may be shopping for a house in the area.  While that created quite a stir in the community, inventory levels are still at amazingly low levels with multiple offers creating a great deal of strain on Buyer’s agents.  In the under-$500K category single-family home inventories are running at one month’s supply. In the $500K to $1M category SFH inventories are 3.1 months supply and in the $1 Million plus category inventories are improving but remain relatively high at 7.6 months.   Agents are hoping Lady Gaga helps them with the higher end category. In Sebastopol, open house activity remains strong with lower priced and well-presented properties garnering the best response and the most offers.

SF Peninsula — Our Burlingame manager says agents are “crazy busy” and honing their multiple offer skills as it seems that every home in every price point has multiple buyers making offers. We are back to the non-contingent 1-3% per offer over asking type of market, last seen in 2004-2006. One Burlingame listing had 7 offers. The winning offer was $200k over asking. One other listing had 9 offers, and $179k over asking only got a backup position.  The challenge now is taking the buyers who are rightfully afraid of overpaying for a property through the process enough times and suffering enough disappointment that they begin to understand what it will take to be successful in an offer. In Half Moon Bay, our local office is seeing a lot of buyers from the over the hill coming to the coast with serious interest due to the low inventory and multiple offers situations on the Peninsula. Our Menlo Park manager says she’s seeing some “pretty vicious competition” for prime housing there.  If buyers do not have 50% down, it is VERY difficult to buy a house.  The local market still needs a lot more inventory. Buyers want to buy now. Our Palo Alto manager says they’re still suffering from extremely low inventory – probably a seven year low.  There are approximately 20 listings for 425 agents in Palo Alto.  Quite a few off-market sales are occurring – adding to an inflamed market. There was some good action in the Woodside office, including a couple of big sales – $8 million and $13 million. In San Carlos almost all sales are multiple offers due to extremely low inventory.

East Bay – Buyers are buying, according to our Berkeley manager.  The office board is filling up with more listings finally hitting the market as of last week.  But the reality check regarding pricing is still eluding many homeowners.  Tough conversations going on between sellers and their agents.   Inventory continues to remain low in Livermore with 153 listings, which is very close to the low in 2012.  We have less than one month’s inventory based upon the current sales pace in February.  Total pending sales in Livermore in February were up 38% compared to January and up slightly from a year ago. Sales activity has increased, according to our Orinda manager. Buyers are making offers and many sales are in multiple offer situations. Our Walnut Creek manager says this is the lowest inventory agents have seen for years.  Multiple offers on most every listing that comes on the market.   A condo in Walnut Creek received seven all cash offers.  Some areas such as Clayton, where the market has been sluggish, have finally started to move.  Pockets of the market are showing and increase in prices. 

Silicon Valley – “It’s nuts out there,” our Cupertino manager said. Both sales activity and inventory are increasing and a third of sales are resulting in multiple offers. Our Los Altos manager reports that the single-family home segment of the market continues to surge and he’s seeing multiple offers in double digits and overbids of 10-15% on well-priced homes in good school districts in Los Altos, Mountain View and Cupertino areas.  Some activity is driven from the “Facebook buzz” and some from the stock market uptick. Financing is still a problem for many and some buyers make cash offers to out compete the others and then try to get a loan during the escrow period.  Interesting times ahead as we have lost inventory in Santa Clara County each week this year beginning the second week of January. We are seeing an uptick in multiple offers at all levels of the market in the Los Gatos area. In San Jose, our Almaden office manager says overpriced listings are not selling.  However, you cannot underprice a home.  It will and does get bid up – typically much higher than if you came out asking that price.  Sellers who feel the market is healthier are confusing that it is time to raise prices.  That’s not working.  Overall inventory is lowest we’ve seen in a decade. Similarly, our San Jose Main manager says inventory continues to decline. Open houses are extremely active. Low interest rates and increased consumer confidence is driving the market. Multiple offers are common in all price ranges. Sales activity is also up in Willow Glen.

South County – Sales in the South County and San Benito County real estate markets started out very strong this year, our Gilroy manager notes. Inventory in Gilroy, Morgan Hill, and San Benito County hovers around 115 homes for each area. We are seeing an increase in all three areas of traditional sales coming on the market, although the majority of closed sales year-to-date are still either REO or short sales. New homebuilders are seeing some great success in moving their inventory, and are reaching out to agents like never before. As a result of their efforts, one agent in the Gilroy office has sold 10% of D.R. Horton’s Dakota subdivision thus far. The buyers are out there, interested and engaged, our Morgan Hill manager says.  Morgan Hill agents are reporting large numbers of potential buyers attending open houses.  Lately it is not unusual for 20 to 30 groups to walk through a home during an open house.   Last weekend an open house in the Evergreen area of San Jose garnered over 100 visitors.  Low inventory coupled with high buyer demand is reflected in higher final sale prices.  Homes that are correctly priced are receiving multiple offers with buyers agreeing to pay over the original asking price.   However, the one challenging note to this phenomenon is that appraisers continue to be very conservative in their approach to value and underwriting guidelines remain stringent.

Monterey Peninsula – Market activity continues to be very good over the past two weeks, our local manager reports. Having a three-day weekend is always helpful to agents, with people coming from out of town to look at property on the Peninsula.  There are lots of buyers looking for good values across the price ranges except for the very top, where the showings are less frequent.  Inventory in the lower price range is in short supply and when a good, less expensive property comes on the market, it is getting many offers.  Carmel and Pebble Beach have had 36 sales closed since beginning of the year, 24 of them above $1 million. Our local offices had a great Previews sale last week, a short sale for $6,750,000.  There have been 12 sales in Carmel/Pebble Beach over $1.5 million since first of year, with the most expensive on Scenic in Carmel for $8 million.

2012 has certainly started off on the right foot. Home sales in the Bay Area were up in January. Several key economic reports showed surprising gains. And even the long beleaguered job market turned in positive numbers in the initial weeks of the new year.

 Bay Area home sales in January jumped to their highest level for the month in five full years, according to DataQuick, the La Jolla-based real estate research firm. A total of 5,479 new and resale houses and condos sold in the nine-county region during the month, up 10.3 percent from January 2011. This marked the seventh straight month of year-over-year sales gains.

DataQuick attributed the improvement to lower home prices, record-low mortgage interest rates, a surge in investor purchases and an improving economy.
While the jump in sales is encouraging, the firm cautioned that activity was still tilted heavily toward distressed sales in many Bay Area markets. As a result, the median sale price dipped 2.8 percent from the previous month and 3.6 percent from a year ago.

Meanwhile, the U.S. economy finally appears to be gaining some traction. The government reported that the GDP grew at a 2.8 percent annual rate in the final quarter of last year, up sharply from the third quarter’s 1.8 percent rate. And there are indications that the latest GDP figure could actually be revised higher due to wholesale inventories rising in December.

Even more encouraging for the housing market, the labor market is steadily improving. Initial weekly unemployment claims fell 15,000 to 358,000 in a new report by the Labor Department. And the four-week average fell to its lowest level since April 2008, the period before the financial crisis. Finally, the unemployment rate has dropped to a three-year low of 8.3 percent.

Most analysts agree that in order to have a self-sustaining recovery in the housing market we first must have a significant turnaround in the job market. There are indications with improvements in recent months that could be happening at long last.

While all of these economic and employment reports give us reason for optimism, we can’t ignore the fact that the housing market still faces some challenges before returning to normalcy.

Sales have rallied in the new year, but we’d like to see the mix of homes selling move more towards the center of the market and become less reliant on distressed sales. That’s happening in many communities, but far from all.

Additionally, while buyers have gotten the message that things are turning around and they’re jumping back into the market with both feet, the same can’t be said of sellers.  In many communities there still is a drastic shortage of homes for sale, which is frustrating buyers and leading to multiple offers in many cases.

Things are out of balance right now and that needs to change for us to have a healthy market. I suspect it will as the spring selling season comes along and homeowners realize that the market and economy have both turned the corner.

Buyers are out there and willing to pay fair prices for attractive, well-priced and well-maintained properties. Now we just need sellers to join the party.

Below are market notes from SF and surrounding areas:

San Francisco – From my office: Open houses are going wild.  One agent reported 400 attended a weekend of open houses and other agents are generally reporting very busy traffic.  Agents report that our regular Tuesday Broker’s tour is populated with homes that have already received offers – sometimes before the Broker tour and after a single weekend of open houses.  Inventory remains a fraction of levels from a year ago. The same is true in the Lombard area, according to our local manager. There has been good recent activity but the listing shortage is getting critical. Many multiple offers. Our Market Street manager says the local market is very heated.  He recently sat in on a multiple bid situation where the seller was presented with 7 offers within a week of being on the market.   All 7 offers were at ask or above, with two top offers to be considered.  One buyer had well over 50% down, the other waived all contingencies.   Offers are very competitive, so in addition to price, buyers are tightening up the terms of their offers to be considered.   70% of our offers over the last two weeks saw multiple bids, as inventory is down roughly 45% from a year ago the same period. Our Sunset manager says he’s seen very active open houses – a lot of buyers looking for the right property.  Problem is, there is no inventory.  Many of the agents are saying they are working with many buyers but there is nothing to sell.  Listings that have been on the market for months are getting into contract. 

North Bay – Our Greenbrae manager is hearing from his agents that the market is extremely active. This comment from one agent who just had an open house typifies the feedback: We’ve had great turnout–100 agents, some with their clients.  I sense there is a lot of pent up buyer demand and there’s very little inventory right now, at many price points. This may be a good sign–that demand is outweighing the supply.  Is it sort of a bottom??  Distressed sales seem to be slowing, and sellers who are “sitting out the market until it gets better” may be willing to bring their homes on the market now at realistic prices.  Pricing’s critical as always, and homes that are price slightly below market value seem to be getting multiple offers. Our Southern Marin manager concurs, noting there is an extreme lack of inventory versus the number of motivated buyers.  The effect is multiple offers on good properties in every price range, from short sales/REO’s to Previews properties.    There is an energy that we haven’t seen since the beginning of the financial crisis, as record number of buyers are showing up at open houses, and buyers are much more eager to step up to the plate with offers on what they perceive to be well priced properties that offer a good value. In Sebastopol, we are seeing a lot of multiple offers in the sub $400k range. One new listing had over 17 offers with three of them written by this office. We have buyers stacked up like cord wood and not enough inventory.

SF Peninsula — Generally we are back to multiple offers for anything new, well priced and well presented, our Burlingame manager says. They recently had 9 offers after 6 days on the market for a San Bruno property. There were 5 offers in 6 days in Burlingame etc. The pool of wonderfully prepared buyers is continuing to grow and they are all moving from property to property as each multiple offer goes down.  Many sellers are of the opinion that it may be in their best interest to wait for Facebook to create new “millionaires” as they foresee (and hope for) higher prices in the wake of that big IPO. There are 46 active and 11 pending listings in Hillsborough. There is a lot of new inventory in the pipeline being readied to come on in the next 3-4 weeks.  There is very scarce inventory in San Mateo Park with only 3 active and 2 pending listings. Multi-million dollar homes are starting to move, but there is still a lack of inventory. There were 10 offers on a property listed in San Mateo $1.2m range. An old listing on the coast is finally selling, our Half Moon Bay manager reports. Agents are starting to get calls on their expired listings asking if the seller would be interested in seeing an offer. Our Menlo Park manager has seen lots of moving around but very, very low inventory. This happens every year (more buyers than sellers) but this year it is extremely unbalanced. The same is true according to our Redwood City manager, and its driving multiple offers on many homes. One property in San Carlos listed at $965,000 had four offers and went over $1,000,000. Another property in Woodside listed at $1,295,000 had 6 offers and went over asking. Low interest rates and lack of inventory have buyers making offers. Our San Mateo manager is seeing a market that is “Shades of 2006.”  The lack of inventory currently is causing more multiple offers on those properties.

East Bay – Listings remain a scarce commodity, our Berkeley manager reports. Buyers are attending open houses, even some properties that have had more than a few open houses, and we just received 22 offers on a fixer in Oakland, but there is not enough inventory.  The agents report that sellers are hesitating, still expecting a boost in the housing market.  At least buyers are getting the message that this is a great time to buy. Active inventory in Livermore remains very low.  We have had 56 new pending sales in February, as of 2/14/2012.  This is exceeding the daily sales that occurred in January 2012.  82% of the new pending sales were listed at $600,000 or less.  Almost 68% of the new pending sales were distressed properties. Multiple offers are very common in this market.  The lack of inventory currently on the market is driving the number of multiple offers, our Oakland-Piedmont manager says. While we are ratifying offers that have been in competition we are also losing out in competition as well.  Agents bringing on listings currently are being contacted for showings within a short time of the property going up on the MLS. On the open house front there was a low count of 60 people to a high of 200+. Our Princeton Cap rep received 3 new applications between 6:30 one evening and the next morning. Orinda agents are reporting that buyers are ready to purchase. However, because inventory is so low, most good quality listings are snapped up, many with multiple offers. Even homes that languished last year with no offers, once back on market are selling quickly. At last inventory is coming on to the market, our Walnut Creek manager has observed.  Buyers are out there looking and buying.  Inventory is selling as fast as it appears, often times with multiple offers.   Could this be signs of Spring?  Or are they true signs of an improving market.  Another good indication is that more than half of our sales are “equity sales”.  And those tough “short sale” transactions are closing much easier and faster.  

Silicon Valley – Lots of competition for well-priced homes in the popular areas, our Cupertino manager says. The Previews market is picking up, especially under $2 million.  In Los Altos, more buyers are getting ready to move, trying to beat the Facebook crowd. Multiple offers are happening in half of the sales. Creating inventory continues to be the biggest challenge in Los Gatos. The same story is echoed by our Palo Alto manager, who says inventory is almost as low as in 2005 – with extreme demand. Lots of activity at open houses, reports our San Jose Almaden manager.  Buyers are competing for homes under 500K.  Sellers who feel the market has improved and now they can ask more don’t sell.  However, buyers are willing to pay top dollar for “turn key remodeling.” In Saratoga, even though we’re experiencing multiple offers below the $2.5 million level, the inventory remains very low. Our manager is encouraging agents to tell their sellers that this is the time to place their homes on the market. We’re experiencing many multiple offer situations.  Anything below $3,000,000, if priced correctly, seems to be selling fast. Buyer’s agents seem to be frustrated as there are 5 to 15 offers on each property. This is the time for agents to concentrate on getting listings as they are gold in a market like this.

Facebook’s IPO will not be a butterfly effect unless you figure it will be a Gulliver sized butterfly in our Lilliput sized SF Bay area.  Valuing the company at $100 Billion, the $5 Billion IPO will make millionaires – and even some billionaires – out of hundreds or even thousands of employees, venture capitalists and even one very lucky graffiti artist, who’s stock certificates for painting murals in the company headquarters years ago will be worth an estimated $200 million.

Facebook’s IPO could put a charge into the financial markets, especially the tech sector, much the way Google ignited a NASDAQ run after going public in 2004. Similarly, many real estate experts believe that the “Facebook Effect,” as it’s becoming known, could fuel strong growth in the local housing market – and not just Silicon Valley, but in nearby areas such as the East Bay and San Francisco.

The heart of the Peninsula – areas like Palo Alto and Menlo Park – are already experiencing tremendous shortages of homes on the market. There just aren’t enough listings to meet the strong demand from qualified buyers. It doesn’t take a rocket scientist (or Facebook engineer) to figure out what will happen to the law of supply and demand when you add hundreds or thousands more newly minted millionaires looking for homes.

Multiple offers are becoming the norm again in the heart of Silicon Valley, and homeowners are already getting unsolicited offers on a weekly basis. Many who are thinking of selling say they’re holding off until after the IPO in hopes of getting a higher price – a risky gamble of timing the market. But nonetheless, as demand heats up in the Valley and many of those new millionaires have trouble finding a home or don’t want to pay the premium prices, it stands to reason that you may have a spillover effect of buyers looking elsewhere.

Young Facebook employees who aren’t ready for suburban life, and who have braved the commute courtesy of FaceBook shuttles with wireless and coffee service will likely choose to buy in San Francisco, where they can enjoy all that the city has to offer. The hip, urban existence of clubs, restaurants, art galleries and the theater are very attractive selling points to well-healed 20-somethings.

Of course, Facebook isn’t the only driver of growth in the Bay Area housing market. Certainly there have been other high-profile IPOs in recent years, including Groupon, Zynga, and Pandora. Our Menlo Park managing broker Wendy McPherson has researched 18 other upcoming IPOs from companies that employ 15,000 workers. If even 20 percent of those decide to buy a first home or trade up, the impact on the market could be enormous.

While much of the job growth has taken place in Silicon Valley, San Francisco is becoming known as the Internet Capital of the World, and the East Bay has quietly been the beneficiary of expansion in certain areas, most notably the San Ramon Valley along the Interstate 680/580 corridor. Lost in all the headlines of the tech world was the fact that General Electric plans to build a $1 billion innovation center in San Ramon’s Bishop Ranch development. Such expansions could result in hundreds of new jobs in that area alone.

Given the robust economic growth in the Bay Area, it’s hard not to be optimistic about the future of our housing market.

Below is a market-by-market report from Coldwell Banker local offices:

San Francisco – From my vantage in our SF Lakeside office, we had  two examples of Multiple Offers: 12 Offers – went more than 10% over; 22 offers – went more than 10% over.  And there are still record low inventories.  Interest rates remain low but financing guidelines are still tightening.  All these factors and more lead to a market that is healthy and quick to respond but unforgiving of overpricing or under-preparing.  This is a market where the professionalism of our agents really pays off for their clients – both buyers and sellers.  Our SF Market Street office notes that much of the previously unsold inventory is now spoken for; buyers are taking advantage of property that has been on the market for quite a while and going in and making deals for themselves.    An interesting anecdote: one agent had a deal fall out of escrow after accepting an offer less than asking price in December.  He encouraged the sellers to hold off on remarketing the property until after the new year and to spend a nominal amount to spruce up and stage the home.   Fast forward about 5 weeks and the property is now ratified again, in 11 days, at a contract price of 22% higher than the old offer. Our Sunset office manager says open houses are very well attended. One Outer Sunset home had 120 groups during a 2-hour period.

North Bay – There is definitely a feeling of change in the air compared to the last several years, according to our Southern Marin manager.  The biggest difference over the last few weeks is we are beginning to see multiple offers and full price offers on properties other than REOs and short sales.   A property in San Anselmo listed at $899,000 got six offers, and a property in Mill Valley priced at $1,695,000 that didn’t sell last year got offers immediately after going back on this year fully staged. Not enough inventory continues to be the problem, according to our Greenbrae manager. Very few new listings are on the market, and while sales are starting to occur, it has been slower than anticipated.  There is a lot of pent-up buyer demand as evidenced by the number of multiple offers.  Attached are some market insights straight from the agents. The inventory in Northern Marin remains low as well with the same average we continue to see each week – around 100 properties, ranging in price from $134,000 to $2.5 million. Buyers are finally realizing that if they want a property, they have to move fairly aggressively on it. Across the board, we are seeing an average of 98% sales price to list price.  REOs are priced to move very quickly, and along with short sales, are still making up a large part of our market in Northern Marin. In the wine country market many of the luxury sellers have adjusted their pricing lower in order to capture buyers who have been hovering for several buying seasons.  This has created a good amount of movement in this category. While inventory is at drastically low levels across all categories, Sonoma County is a great value relative to the historic relation with Marin and San Francisco Counties, our Santa Rosa manager says. Obviously as the shortage of inventory persists, we expect prices to rise as we move through the year.

SF Peninsula — Burlingame agents are still waiting for the inventory to build. They’ve had fabulous open homes with big buyer turnouts. Most buyers are motivated to purchase now and have done their homework in being pre-approved. The upper end of the market has had a slow start but more great properties are in the pipeline. Showings have increased in the $2-3 mill. range. As noted in the article above, the Menlo Park local market is really tight.  There are too many buyers and not enough sellers – way of whack right now. Our Redwood City manager reports many buyers attending open houses while inventory remains low. When a well-presented property in a good location comes on the market it sells very quickly, often with multiple offers. It has been a heavy listing month for our San Mateo office as more homes coming on the market in the new year. Most of the sales in the Sebastopol area are entry level. Like other areas, agents there have more buyers than homes to sell.

East Bay – Low inventory and multiple offers are common in the Tri-Valley area.  Closed sales in Livermore have been about even with last year for January, while closed sales were down from 45 to 27 in Pleasanton and down from 41 to 32 in Dublin. Dublin has been hardest hit city in the Tri-Valley area in regards to distressed sales. According to our Orinda manager, agents report they have buyers that are ready to purchase but feel the market may drop prices even further. Local inventory remains low. A few more properties are coming on to the market, our Walnut Creek manager says. Agents are seeing well-attended open houses with visitors who are finally ready to buy.  Multiple offers are being made on many listings. In some corners of the market agents are actually seeing prices slightly increasing.  There is a happy buzz in the air.

Silicon Valley – Our Cupertino office saw 21 offers on a modest home in the Lynbrook area, which was bid up by well over $100K. There suddenly has been a number of sales between $1.5M – $2M. Things are definitely heating up and buyers abound. Like other parts of Silicon Valley, the Los Altos market is regaining momentum but is still very, very low on good available inventory. There has also been increased activity for homes above $3 million. On the heels of a record setting sale in Los Gatos for $12 million in November, our local office just closed a buy side transaction in Los Gatos for $11.5.  These are some good early indicators that the high end is picking up steam. For purchases in the below $500K range in the San Jose Almaden market, buyers and their agents are having to write numerous offers and are often getting beat out by all cash buyers.  One agent wrote four offers over the weekend to have only one of them get accepted.  Buyers are clamoring for inventory, which in this region is the lowest it has been since ’04.  Prices are rising in this range with each seller coming out just a little higher than the last. Our San Jose Main office says the local market continues to be extremely active due to low inventory, low interest rates and an overall rise in consumer confidence. Open houses have been very busy over the past two weekends in all price ranges. And in Willow Glen, there has been an increase in listings and sales since the new year.  Our local manager is hearing of more multiple offers of five or more. The Saratoga market is tracking almost identical to last year as far as the number of sales, listings and closings. The exception is that we started the year with inventory much lower than the beginning level from last year. It will be interesting as we see what happens to the market after the Super Bowl.

South County – The South County is on fire, our Gilroy manager says. Agents are seeing a lot of activity – both sales and open houses. Open houses are well attended.  Multiple offers are prevalent on nearly every sale that is turned in. While we are not seeing crazy over-bidding, we are certainly seeing a lot of cash buyers and competition on terms. New REO listings are slowing considerably and we are seeing a great deal of regular sales. 42% of the active listings in Gilroy are distressed – either short or REO, 39% in Hollister, and 36% in Morgan Hill. According to our Morgan Hill manager, the South County continues to be a good alternative to those buyers who are looking for a better value—especially for upper-end homes.  Estate-like properties on acreage with generous square footage prove to be much more affordable than similar homes in other Santa Clara County cities.  During the past several months our Morgan Hill office has sold four homes—all priced in excess of $1.5 million.  There seems to be significant demand for these types of properties, especially for buyers who find other communities too expensive.  On the other side of the spectrum, entry level and moderately priced homes that show well are garnering multiple offers.  With very low listing inventory agents are encouraging potential sellers that the time has never been better to list their homes.

Santa Cruz County – In Santa Cruz, the story is beautiful weather, high buyer demand and low, low inventory. If buyers are waiting for the “bottom” and have not purchased a home, they may have missed the mark by inches.  The 3rd quarter of 2011 was the beginning of this trend, and Oct., Nov., and Dec. represented a 23% increase in closed sales in Santa Cruz County over 2010.  In addition, with such low inventory, under 600 single-family homes currently on the market, this is driving buyers into frenzy in some instances and multiple offers.  Interest rates are still at an all-time low as we enter into an election year. Buyers are out in full force at open houses. We have been receiving floor calls and many buyers are contacting their agents to find their dream property.  Sellers also can benefit from this window of opportunity with less competition; homes that were not selling last year are selling now.  Perception is reality and with only about three months of inventory, demand is far exceeding what current supply is.  Right now in Santa Cruz we have the ideal conditions for buyers and sellers.

Monterey Peninsula – The Monterey Peninsula’s sales activity seems to continue at a steady beat. However, the decreasing inventory has caused many multiple offer situations of late.  Inventory in the less-expensive areas—Seaside, Marina – of the Monterey Peninsula is down especially, what with fewer and fewer REOs coming on the market this past six months.  Carmel is the hot spot in the luxury marketplace.  Looking at the sales figures for 2011, it appears that Carmel may have bottomed out about a year ago and is now on the upswing, fueled primarily perhaps by the affluent Silicon Valley second-home buyers we have been selling to this past year.  Agents are looking forward to the annual AT&T Pro-Am next week and record crowds are predicted due to the expectation of Tiger Woods’ appearance.  Though agents don’t necessarily sell more homes during this time, they do sometimes make contact with golf fans that are interested in purchasing at a later time.