Bay Area Housing Market Update Q4 2021

Wow, what a way to finish up Q3! Today, I want to share a few anecdotes about a few things I’ve observed over the last quarter, as we are now well into quarter four. I hope this Bay Area housing market update will give you a sense of where we’ve been and also help you to potentially see where we’re going.

There’s something I keep coming across regardless of whether I’m talking to a buyer or seller. It doesn’t matter whether it’s a listing agent, a buyer’s agent, a lender, etc. It seems like everybody is talking about the market flattening, the market tanking, or the market going down. It’s as if everybody has some version of that in their consciousness.

I want to address this and dig deeper into it because I think this will play out pretty severely in the last quarter of 2021 and early 2022. Why do I think that it’s going to be significant going into the 4th quarter? It’s because it’s already on people’s minds. People are really interested in this topic of if prices are going down. They keep on thinking that competition is going down, or interest rates are going up, and all that stuff. It’s deep into their consciousness. However, the question still remains as to what this means in the short and long term.

Deals are harder to put together.

In the short term, what I observed is that deals are getting harder to put together. Before you react, hear me when I say this: There are still really great houses that are still transacting at a really good level. I’m talking about the top houses with the best floor plans in the best locations.

However, things get a little more nuanced once you start to come down from those really ideal, high-end properties at any given price point. It is because you’re getting people who are a little more nitpicky. They might be trying to renegotiate things. So, they might try to pull in a new disclosure. Or, perhaps they may try to be a little difficult when putting an escrow together from start to finish. And there’s just a little bit of that going on in the air, which, honestly, is somewhat typical. Also, you would expect it given the time of year we’re in. However, I’m still feeling it a little bit more right now.

Buyers are sensing a shift relative to the balance of power.

I feel it more right now, especially because the first part of the year was so intense. During that time, the market was heavily skewed towards sellers. But now, I think buyers finally sense that there might be a little blood in the water. It got them thinking they might be able to push the balance of power a little bit into the center.

That’s why there are a lot of buyers that are taking advantage of that right now. Whether it’s writing fewer offers, not committing to an offer date, writing a lower offer, or holding a contingency, it’s just interesting how it’s really manifesting. Also, I’m finding that the inner East Bay, which was really hot during the majority of the year, is not nearly as hot as it was. This includes the traditional markets like Oakland, Alameda (to some degree), Berkeley, and the Hills. 

Some of the more non-traditional markets are getting a lot more attention.

We have several houses in different parts of the bay right now, and we’re finding that the outlying areas, some of the more non-traditional markets, are getting a lot more attention. For example, from Hayward down into Castro Valley, up into, you know, Benicia, Hercules, Pinole. Our open houses in those markets were much more successful than in other markets we traditionally transact in as a team. They had many more people through them, and more disclosure packets with higher offers were coming in.

Part of that is certainly due to the price point. However, part of that also, I think, is because people are fatiguing in some of these traditional markets. Now hear me when I say that the best houses and neighborhoods will always sell for the most money. However, that is not automatically true for every house in a good neighborhood or good zip code. But, even if that’s the case before, it is not a given anymore now. In the past, you could just stick the sign in the yard and put an offer date on it, and then you’d have 20 people show up. Today, it’s just not the case anymore.

Our buyer pool is being more discerning.

Our buyer pool is growing more selective these days. They’re more concerned with what will occur in the future. They are now posing questions to themselves, like, “Do I really need to pay that much money to get this house? Is it possible for me to take a little bit of the heat off, which is really manifesting and making it a little more difficult to put escrows together?” Add to that the inventory that continues to trickle out. People are beginning to perceive alternatives, and it’s causing a lot of the buying pool to become a little more complacent. That is something I observe with some of my clients and some of my team’s clients. Not just that, but some of the listings I’ve got out there in general so it’s a really interesting trend to watch.

And all of these things start with the direction in which the market is heading. Are we returning to a market with more balanced power between buyers and sellers? It’s an excellent question to which I don’t have a great answer yet. But it’s something to watch as we go through the rest of the year and into Q1 of 2022.

Things will typically start to slow down after Halloween.

Speaking of which, long term, what you can usually expect is that things will start to slow down pretty drastically after Halloween. Most buyers and sellers, you’d think, would take themselves out of the market to some extent. People who are shopping either need to relocate or have a tax reason to purchase. If they’re going to sell, they have a relocation or a tax reason to sell before the end of the year. And that’s when you end up getting the best dollar per square foot. So if you’re someone who has a limited budget, this is your moment.

On the other hand, if you’re someone who absolutely has to sell, go for it; otherwise, wait until the spring. Trust me on that one. At this point, I think you’ll be a lot better off if you wait it out until spring.

Inventory that lingers through the holidays gets gobbled up early the following year.

Of course, there’s no telling what the spring will bring. However, generally, the goods that persist over the holidays and into January are gobbled up very early in the year. Furthermore, the fresh inventory kicks in in the third or fourth week of January. Then, definitely by the Superbowl, you generally have the start of your official spring market.

So if you’re looking for a bargain, now might be your moment. This is especially true with the buyer pool taking a step back, feeling that balance of power swing, not feeling as much urgency, and so on. I believe this is a great opportunity. 

There are now fewer preemptive offers.

As far as a couple of anecdotes, one thing I am really watching is the number of preemptive offers. It’s really hard to aggregate that data, but in general, what I’m seeing is that there are fewer preemptive offers made this time. People aren’t jumping in three days into the listing period and writing a really, really aggressive offer. And even if they are, the sellers aren’t taking them.

I see a few factors that I think are causing this scenario. First, sometimes sellers still hold on to some of what it was like before. What were the comps like? What was the competition like? Even from 2-4 months ago, thoughts like these still linger in their minds. While sellers are looking at the past, buyers, on the other hand, are looking forward to the future. Buyers are considering things like, “What’s ahead of me, what can I pay, where’s the market going, etc.”

Consequently, these contrasting thoughts between the two parties create a gap between them. And this gap makes it harder to put deals together and come up with a price they’d both agree on. It’s been really prevalent for the last six months, and I’m seeing it become less and less effective.

What does this all ultimately mean for buyers?

So what does this ultimately mean for you? As a buyer, I think this is traditionally going to be a more typical winter season. It will be a holiday season where you’re going to see some opportunities. Maybe not the best houses that come out at that time of the year, but definitely the best price per square foot on houses. So, if you see something you like right now, you might be able to get it for less than you would have to pay in the spring, especially on a per-square-foot basis. That’s because there’s generally less competition and more distractions during the holidays. People are just generally not trying to move during the holidays. They just want to enjoy themselves, have a party, travel, and do all of that stuff. So if you’re someone who’s looking for a bargain, this might be your moment.

This is also a moment when off-market opportunities become more prevalent. I did a video on that, and I’ll link to the off-market video here. But, generally, people who typically plan on selling in January, February, or March might consider an offer in December. However, remember that sometimes they might just have a transparent number that they’ll take today. Some conditions or considerations may make sellers do this kind of move. For example, if they don’t have to stage or if they can stay there for another month or two. Or, perhaps, if they don’t have to go through the hassle of painting, open houses, and all that stuff. If you’re planning to transact during the holidays, you might be able to chance upon one of those deals.

What does it mean for sellers?

On the other hand, if you’re a seller, don’t sell unless you absolutely have to. This is not the moment to maximize the dollars per square foot you’re going to get in an offer. Unless, of course, you can find a buyer who just loves what you have to offer and will pay you a premium not to go on the market early in 2022. Otherwise, if you can help it, wait. But again, if you really can’t wait, you absolutely need to ensure that your presentation is perfect. This is absolutely critical. Do not miss this point.

When buyers become more discerning, fewer, and far between, it becomes harder and harder to transact. It’s because competition is what drives the prices up, right? So make sure you have the paint, the staging, the photos, the videos, all of that stuff teed up nicely. Because if you don’t, it’s going to flop, most probably. In fact, it’s almost guaranteed.

The good news, though, is that you don’t have a lot of competition. Therefore, if you do have to sell and you nail your presentation, pricing, videos, and all that stuff, you could actually be the only show in town. And, if there are folks who really need to buy, they might have to be forced to deal with you. So keep that in mind as we go into the fourth quarter of 2021. Also, think about what that means for you going forward.

I hope my Bay Area Housing Market Update Q4 2021 has helped you.

If I can give you more context on the process of buying or selling your home, please do not hesitate to reach out. My information is below. 

Here’s to all your success!

Bay Area Housing Market Update Q4 2021

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Bay Area Housing Market Update Q4 2021