Market Update – San Franciscans Continue to Overbid

May 30, 2008

In the last 2 week period, a total of 176 residential properties closed in San Francisco. The breakdown:

Single Family: 44 over ask, 23 under ask and 13 at asking price
Condos/TICs: 21 over ask, 35 under ask and 19 at asking price
2 to 4 units: 8 over ask; 13 under ask and zero at asking price.

A word about pricing: The two most important factors in the ultimate sale price of the home are 1) the quality of the property versus the competition; and 2) the pricing strategy. As you can see, above, the the San Francisco market continues to show that our buyers just love to compete especially for their own residential purchases. I have some psycho babble guesses (see below) about why this is the case, but whatever is causing it, it remains a major factor in our market. Sellers who are pricing conservatively (e.g., as low as they can stomach) are ultimately outperforming sellers who price for what they “really want.” Thinking of selling your home now or in the next 12 months? Please let me know so I can work up the numbers for you!

Guess #1: Highly competitive people are drawn to our market and they are more willing to compete in general than people where it doesn’t take as much drive to live.

Guess #2: The feeling that everyone wants what you want and are trying to get provides emotional support that you are really paying the right price.

Guess #3: Everyone loves a bargain. Underpriced homes feel like you are getting more for your money, so they attract more than their share of admirers.

How should I deal with this as a buyer?  Go ahead and make low offers on things that seem over-priced with confidence. Don’t be afraid to make a (reasonable) low offer on something that is sitting around. And when you have a good deal on the table, don’t doubt yourself just because no one else is stepping up and trying to take it away from you.