Just when you thought you had figured it out.
Today, I am bringing you a market update to share some anecdotes, thoughts, and experiences I’m having here on the ground. There won’t be a lot of data or graphs in this one. It’s more of a sense of where we’re at, what’s happening, transaction stories, and some other good stuff like that. Hopefully, these will give you a sense of what’s going on in the local East Bay real estate market.
The name of the game here is preemptive offers. What I’m finding is that people are jumping the gun. Traditionally, before COVID, listing agents set an offer date two weeks after the house went live. Once the lockdown occurred, it accelerated all of that to one week. Sometimes, it would only take five days.
Since June, I’ve been experiencing a huge number of buyers who are jumping in early. They would jump in, even before a posted offer date was posted, and submit an offer quickly. What that’s doing is creating an absolute frenzy. It creates a lot of paranoia, worry, and concern about not getting a chance to bid on the house. And that FOMO is leading to people rushing over to see a property ASAP.
Consequently, what it’s translating to is that people who are simply writing big offers continue to write aggressively. That’s what I’m feeling in general. They push prices further and further.
Of course, now, in addition, interest rates have gone down. Since the last time I did a market update, interest rates have even further improved, making them still very attractive. As a result, buying power has again expanded. However, right now, I’m generally finding a sense where people are really eager to get into houses and are willing to pay higher prices for them. I have a couple of examples here for you.
Example No. 1: A house for sale on Broadway in Alameda
There was a house for sale on Broadway in Alameda, which is a very busy street. This house was very close to a bustling intersection. I expected the location alone to hold the house back 10% or more despite being in the coveted Edison Elementary School District. A number of metrics show that Alameda buyers want to live there, especially with all the uncertainty about distance learning versus in person.
So, people are really competing for it. It ended up receiving between eight to ten offers on it. And as I understand it, it hadn’t closed yet when I made this video. It went over $1.6 million, which is crazy! It was only a 2BD/2BA house, but it has a nice backyard, to be fair. However, it was located on an incredibly busy street, which would usually cut at least 10% off the price of a house a couple of blocks into that neighborhood.
Example No. 2: A house for sale near Washington Park
Another example is a similar story in Alameda that I just had an offer go in on. It was a 2BD/1.5BA house on 8th St. It’s right across the street from Washington Park. It’s a nice house which has been fixed up pretty well. Also, it was located on a bustling street, which you would essentially assume would equate to a lower offer. However, what happened was: we got totally killed. We wrote a very strong offer, arguably above the comps, yet someone still beat us by over $100,000!
So what I’m saying is that I’m still getting a sense of people trying to jump in right now. Whether that’s with preemptive offers or not, people still jump in hard. I’ve had a couple of listings personally in the last couple of months that got preemptive offers that are very strong. However, if a house makes it to the offer date, I still see people duking it out at the top.
What I do not see, though, is the breadth of offers at the top. There are a handful, maybe two or three. Then, in most cases, there’s a big fall off. So what I’m finding is that, in general, there’s a group of people much smaller than it was three to four months ago who are still really eager and are still pushing the prices from the spring and into the summer up and up and up.
What does it mean for you if you're looking to transact in this market?
1. The competition might be shrinking, but the top-end buyers are still there.
So what does that mean for you as someone who’s looking to transact in this market? First, you need to know that the competition might be shrinking a little bit. The buyer pool might be shrinking, but it doesn’t appear that we’re losing the top-end buyers, in most cases. Now, granted, the houses I have just shared anecdotes about were desirable. Except for them being on a main, busy street, they were really great houses. If only they have been placed more on the inner blocks in their neighborhood, they probably would have sold for even more than they did. Nonetheless, they had serious competition and serious people pushing the price up. So even though you might be reading headlines saying like, “it’s cooling off,” or “inventories are catching up,” locally, I’m still seeing people really push for the good houses.
2. There is still a lack of inventory.
Second, there is still a bit of a lack of inventory. That’s because we’re in August. In case you don’t already know, it’s always that way. There is a narrative here locally about not listing before around Labor Day. And interestingly enough, all the real estate agents I know leave town during August, myself included. Frankly, I’m even going on a little vacation here in a second.
What you see, generally speaking, is most of the houses holding off until after Labor Day. The inventory begins to appear in the first two weeks of September. So if you’re looking to buy, this may be a time to sit tight, wait, and observe. You might want to wait until September rolls around, when you see a surge in inventory. Hopefully, all the people striving to get in for the school year for the school district have already closed a deal by then. That means it could be an excellent opportunity for you to strike. And hopefully, you can come in and be towards the top of that pile now.
3. Because of the COVID lockdowns, many people are considering their lives differently again.
Lastly, what I think is most important is the uncertainty that we’re seeing relative to COVID—lockdowns, working from home versus going back into the office, all of that kind of stuff. That uncertainty made a lot of people reconsider their lives differently again. I’m finding that the school district is making a huge difference for people. Not only that, but also the livability, the neighborhood, the experience they have around their house and not just in it, is really starting to matter again.
Certain neighborhoods like Temescal, Rockridge, Diamond, Oakmore, the East End of Alameda, and various parts of North and South Berkeley that are walkable and have a community aspect are getting a ton of energy and attention right now. I think that’s because people value that community aspect of life, as opposed to just like we saw before COVID, in a sense.
Now, I think people are really starting to value who their neighbors are and where they are. They consider things like the values of the community that they plant themselves in. Schools, sports, and recreational programs–all of that kind of stuff is starting to matter again as well. If you’re one of those people or live in one of those houses, I know you know that kind of vibe is true. So I think that that is not so subtly coming into play with our buyer pool, driving our real estate market to where we’re at now.
I hope my Bay Area Real Estate Market Update on Preemptive Offers, Shrinking Competition, and Anecdotes from On-the-Ground 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!