Last Wednesday, ABC7 news anchor Reggie Aqui invited me over to his show to talk about the state of real estate in the Bay Area. Are we in a real estate bubble? Here’s a summary of what we talked about and what buyers and sellers in the Bay Area NEED to know.
If it’s real estate we’re talking about, why was I even cursing? Well, I just wanted to simulate that feeling that a lot of buyers have out there. This market just has people wanting to rip their hair out!
But why do they feel that way?
By now, you’ve probably seen headlines on the news or on social media that tons of people are leaving the Bay Area since the pandemic started. Like what Reggie said, they’re probably going to Austin or other cities where there are tech jobs or where their desire to work remotely forever is leading them.
DESPITE that, there’s still a huge lack of inventory. You probably thought this wouldn’t be the case if so many people are really leaving, but it is. And right now, it’s still really hard to find affordable houses in Alameda.
How come? How do those two things come together?
Shockingly, even though there’s a ton of people leaving, a lot of buyers out there (and a lot of them are cash heavy) are still clamoring for the small amount of GOOD inventory that’s popping up.
Just recently, I represented a buyer of a very small home. It was very cute, it was staged well, and it’s very livable for two people. But at the end of the day, it’s still less than 1,000 square feet in a part of the island that you don’t normally see that kind of prices unless you get to two, three, or four bedrooms.
So are we in a real estate bubble?
Well, that’s what it seems. In general, a huge component of a definition of a real estate bubble is exuberant spending. And right now, I’m definitely seeing people buy homes for sums of money that are in excess of the comps.
Just recently, I had a buyer write an offer for a property in Albany that’s $50,000 over the best comp I could find. The outcome? They were one out of SIXTEEN offers and they also got beat up by over $300,000.
So while it’s obviously a great time to be a seller, what can buyers do?
How can buyers keep themselves from feeling like they want to rip their hair out?
It all comes down to being really clear on what it is that you want out of the home. Simply put, it is not the time to just casually shop. You need to really identify what you want and need need. For example, do you need space for your home office? Or for your pets? Or your in-laws, etc.?
You have to get really, really clear on that and then know what’s within your budget. Also, patience helps too as it might take a couple of months for some of these cash heavy buyers to kind of duke it out at the top and exhaust each other.
But opportunities still exist. There are still listings out there that will fit you criteria. There are listings too that get mismanaged or overlooked. So if you’re crystal clear about what you want? You can definitely still strike gold.
What about the condos?
Another thing that Reggie asked me in the interview is how about the condos? Compared to the single family homes, how have the condos been affected by the current market trends?
Unlike the detached single family homes, the condo market has taken an unfair share of the COVID brunt.
In contrast to the prices of the homes that have been driven up due to the high demand, the buyer pool for condos has shrunk substantially. I call it the COVID effect. People don’t want to share elevators and hallways with all of their neighbors, knowing that breathing the same air as them could potentially give them COVID so we’ve seen a hit in the sales. In addition, I won’t exactly say that condos have lost value substantially, but they definitely haven’t seen that same appreciation that’s in the single family homes.
The bottom line?
To succeed in this market, there are a few things that both buyers and sellers must pay attention to.
For sellers, if you’re going to sell your home now, you have to kill it on the presentation because we’re in an Instagram “three-second” world. You have to grab people’s attention as they scroll though the internet. If you do that and you price it effectively, you will get attention, which results in offers. However, if you fail at that, you might get results which you won’t be happy with.
On the other hand, if you’re on the buyers’ side, if you’re super clear with what you want from that house, that you’re going to live in it for ten or more years, that you can justify that, and make that make sense for you in your life, it’s a good time.
However, if you are someone who’s struggling to come up with at least 20% down and you are still unclear as to what you really want, this may not be your moment. But just be patient and watch until May, June, or whenever some of this heat comes off of our market, and you might still be able to succeed and find the house that’s perfect for you.
I hope my update about the state of the Bay Area real estate and why we’re in a real estate bubble has helped you.
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