How San Francisco Got Her Real Estate Groove Back (May 2011 Insider)

Redfin’s monthly Bay Area real estate insider report draws from our proprietary database of information on homes for sale and that just sold, along with insight from our agents to get a sense of what’s going on in the market right now. If you’d like to receive the report via email, just sign up.

Howdy Bay Area Redfin Fans!

The stalemate between Bay Area buyers and sellers may finally be ending. For months, regular sellers have been wary of entering the fray and competing against banks on price. Buyers haven’t wanted to get into a bidding war they’d regret. The result: few homes to buy, fewer sales.

But now we’re seeing some Bay Area buyers blink: with the summer season upon us, we’ve noticed buyers beginning to raise their opening bids, and prices in five of the six counties increased in May. This won’t actually increase prices too much, as we’re also seeing banks beginning to sneak more homes onto the market.

But deal sizes have definitely increased, in part because the government is paring back support for high-end loans this October. The big factor driving the high-end market is the local economy, which still exists in a world of its own: LinkedIn and Pandora have had monster IPOs, with Zynga, Facebook and many others still to come. For whatever reason, many Bay Area Redfin customers are suddenly touring very nice homes.

Meanwhile at Redfin, we’re now asking everyone to update her profile with a Facebook photo, which we now use to personalize the site and in customer reviews of agents. And we’ve started leaving notes on most homes we tour — about the slope of the backyard or the traffic on the street — which we’re only allowed to publish to folks who register on our site. In some neighborhoods, we’ve left notes on a third of the homes for sale so it’s worth checking out for sure.

Prices Increase in Five of Six Counties

While prices are down from last year’s tax-credit boom, we already see evidence that the drop has stopped, less than halfway through the year. May prices were higher than April’s in five of six counties:

Change in Median Price of Houses That Sold in May 2011

Silent Spring: Inventory Drops in Four of Six Counties

The problem is that there isn’t much to buy. As we’ve observed on national television and in print, the supply of homes for sale is falling faster than demand, limiting price drops. This is especially true in the Bay Area where the number of listings declined in four counties last month, and remained flat in the other two.

Change in # of Houses for Sale on May 31st 2011

Competition Most Intense on the Peninsula, in San Francisco

Our own agents report that competition for a handful of turn-key listings in every neighborhood is most intense on the Peninsula and in San Francisco. But even in the rest of the Bay Area bidding wars are still common on almost any bank-owned listing.

Buyers Stepping Up Their Offers

Mark Biggins, Redfin’s Oakland agent, reports that “in the past month, three out of every four offers I make have faced competitive situations, where the home ultimately sells for $50,000 to $200,000 over the asking price.”

Amber Zahn, Redfin’s agent for Walnut Creek and San Ramon, reports that both bank-owned listings and traditional sales in San Ramon are still attracting multiple offers. “As buyers become more conscious of the competition, they’re coming in at more aggressive prices. The stalemate between Bay Area sellers and buyers is starting to end, and in sellers favor.”

Banks Stepping in to Reduce Their Backlog of Foreclosed Listings

But this is far from a universal trend. In San Jose Redfin agent Martin Garcia reports that inventory is “still plentiful,” and many buyers have grown “wary of getting lured into a bidding war” by the banks’ deliberately under-priced listings.

And we’ve noticed that bank-owned listings may be on the rise again, as banks release some of their backlog for the summer selling season. “In the past few weeks, I’ve seen a jump in offers on bank-owned homes, perhaps because banks are releasing more listings onto the market,” said John Chen, Redfin agent for San Mateo.

“The banks probably see the low inventory as an opportunity to make some sales while traditional home-owners wait out the double-dip,” John said. “Almost all the homes I’ve worked on in the past month have sold quickly, for the list price or above, usually in a bidding war.”

Sales Volume Mixed

Sales increased from April to May, but not by much once you adjust for May’s extra weekdays, and certainly not as much as you would expect when May is usually the beginning of the summer real estate bonanza:

Change in # of Houses That Sold in May 2011

Demand in our own Bay Area business has been light, but the buyers we do have seem more frustrated than scared-off, waiting for properties to buy not prices to bottom.

When we do put together deals, we’ve noticed that sellers have become very risk-averse, particularly about the appraisals required by a lender. If the house appraises for less than you’ve promised to pay, the lender will balk at loaning the money until the price is reduced or the buyers come up with more cash.

Many sellers’ agents are insisting that buyers use a local lender, just because no one outside the Bay Area is willing to believe that home prices here are still so high.

Redfin’s leader of the Peninsula team, Brad Le, noted that some sellers are asking buyers to sign disclosure packets in advance of tendering an offer. Here at Redfin, we are now also insisting that our customers write personal letters to accompany their offers, in case the seller needs an emotional tie-breaker.

So that’s it for this month! Consumers nationwide are spooked, but here in the Bay Area the problem is more that there isn’t much to buy, which lowers sales volume but keeps pricing from falling, regardless of whether they should. For numbers on every city and neighborhood, download our big spreadsheet. If you have any comments about this report, just post ‘em below.

Best, Glenn
Glenn Kelman | CEO, Redfin
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Bay Area Real Estate Enters the Twilight Zone: Bidding Wars and Falling Prices (April Insider)

Redfin’s monthly Bay Area real estate insider report draws from our proprietary database of information on homes for sale and that just sold, along with insight from our agents to get a sense of what’s going on in the market right now. If you’d like to receive the report via email, just sign up.

Howdy Bay Area Redfin Fans!

The Bay Area market entered the Twilight Zone this April. After double-digit gains in March, prices fell in most counties. Sales volume slipped back after a 50+% March spike. And at a time of year when inventory usually zooms up, the number of homes for sale actually fell, suggesting that the price dips spooked a few sellers.

What’s weird about all of this is that prices and sales are off even though the Bay Area has many of the usual signs of high demand: bidding wars, all-cash offers, fast sales. The hand-to-hand fighting at a house-to-house level is fierce, and it’s why we disagree with the folks who think the market will keep falling all year. We think prices will be more saw-toothed from month to month.

Our guess is that year-over-year declines will continue — last year there was a tax-credit run-up that will be hard to clear in 2011 — but month-over-month there will be as many ups as downs. The X-factor is interest rates, which could rise due to U.S. debt gridlock, hurting the market. But we don’t see a pattern now of consistent monthly declines. Time will tell who’s right.

Our own Bay Area business is booming, driven in part by Agent Insights, the new website feature in which our agents share notes on homes we’ve seen in person: already, we have the inside scoop on 13% of Walnut Creek listings, 11% of Fremont, 12% of Mountain View. Our San Francisco engineering team is now hard at work on an Android app, due out in June or July. And we’re hiring: if you know any good software engineers, send ‘em our way! With that, let’s dive into the data…

Inventory Declines When It Should Be Rising

The problem in the Bay Area is simple: there aren’t enough good homes to buy. One in four sales is foreclosure-driven, driving prices down and regular home-sellers out of the market. At a time of year when new listings should be peaking, inventory is flat or down everywhere except Marin County:

Change in # of Houses for Sale on April 30th 2011

A Seller’s Market Except For One Little Thing: Prices Are Falling

The inventory crunch has turned the Bay Area into a seller’s market in every way except where it really counts, in sale prices. Here’s the madness we’ve been seeing in our own business this past month:

• Bidding wars: a few weeks ago, Redfin agent John Chen reports that a Millbrae listing attracted seven offers, accepting one for $110,000 over asking price, later negotiated down slightly at the inspection. According to Redfin’s Kiesha Stevens, a one-bedroom — marketed as two, though the second was zoned as storage — in the Sunset attracted 36 offers, selling for $100,000 over asking. A Potrero Hill listing in San Francisco attracted four offers and sold for 6% over asking price. A six-year-old Gale Ranch townhouse in San Ramon got six offers in five days. Regina Puzon, Redfin’s upper Peninsula agent reports that bidding wars have become the norm, especially on bank-owned listings.
• Fast sales: Martin Hendren, a Redfin agent in Concord and Walnut Creek, reports that a Redfin customer scheduled a tour for Wednesday on a Sunday night, but by Wednesday all five homes were already under contract. Across the Bay Area, we are telling buyers to move quickly on homes they want to tour.
• No contingencies: For the first time in years, Redfin home-buyers made offers last week with no inspection or financing contingencies, one in Palo Alto, one in Campbell. Both were accepted. Incidentally, both later had problems with appraisals that came in below the agreed-upon price. You normally only see such no-contingency offers in a bull market.
• Frustrated buyers: Charmaine Frank, leader of Redfin’s Berkeley and Oakland teams, reports that “many of our customers have started chasing short sales because they don’t have any other properties to work with,” whereas Sean Sullivan, a Redfin San Francisco agent, says his market “seems split between buyers who are goal-oriented and those who are still learning” about the competitive dynamics.
• Cautious sellers: Bay Area listing agents are now routinely asking to speak to the buyer’s lender, to ensure that the financing comes through. “For the most part, the folks who can afford to sell in this market have plenty of equity so they’re not desperate,” said Martin Garcia, Redfin agent for the South Bay. “I just represented a buyer making an offer on a San Jose home that had no other offers, but the seller still rejected the offer over concerns about a Wells Fargo pre-approval letter generated via the web.” Brad Le, leader of Redfin’s Peninsula teams, confirms that listing agents now prefer to see an offer financed by a local lender, mostly to avoid appraisal problems from out-of-state banks.

Prices Fall in Four of Six Counties

So if inventory is low and demand is strong, why haven’t prices continued to increase? After big gains in March, April prices were mixed, with only Contra Costa and Santa Clara counties maintaining momentum:

Change in Median Price of Houses That Sold in April 2011

In the other counties, we think bad inventory is chasing out the good: anyone with a picture-perfect home won’t sell now unless she has to, so pricing is largely being set by the banks with distressed inventory.

If you look at the homes the banks are selling, it’s easy to see that falling prices are the result not simply of deflation, but an actual decline in asset quality: many bank-owned listings are in sad shape. When a pretty house hits the market, everyone lines up to buy it. But most houses aren’t pretty, and prices overall keep dropping.

Sales Volume Declines 9% – 15%

Falling prices are scaring off would-be sellers more than they are motivating would-be buyers. As we predicted, April sales volume declined 9% – 15% in most counties after an eye-popping 50+% March spike, which we also predicted.

Change in # of Houses That Sold in April 2011

And the ups and downs won’t stop: in our own Bay Area business, new customers slipped 9% last week compared to the four-week average, but customers writing offers increased over the same period by 59%. That sets us up for a strong June, but a weak July. This is why I take omeprazole every night.

And that is all she wrote for the Bay Area in April! As usual, we attach the raw data for you to peruse; it includes Napa, Sonoma, Monterey, Solano and San Benito counties for the folks who live out there. Questions or observations? Just leave a comment below.

Thanks as always for your support!
Best, Glenn

The Bay Area Snafu: Sales Down, Prices Up (Feb. 2011 Insider Report)

Redfin’s monthly Bay Area real estate insider report draws from our proprietary database of information on homes for sale and that just sold, along with insight from our agents to get a sense of what’s going on in the market right now. If you’d like to receive the report via email, just sign up.

Howdy Bay Area Redfin Fans!

The Bay Area real estate market is in a quandary just now. Sales volume is down. Prices rose. The number of homes for sale is mostly steady. What’s going on? Buyers are coming out of the woodwork, but only when they see a nice place at a good price. Many sellers meanwhile are holding out for what they hope are better days. There was a brief bulge in January inventory, now more waiting.

Whether the market will take off or falter is anyone’s guess. Redfin meanwhile is preparing a big upgrade to our website for this Thursday. And we’re still hiring on all fronts, for Bay Area real estate folks as well as software engineers. For now, let’s dig into which Bay Area neighborhoods are heating up, and which are spiraling down…

Sales Volume Drops Across the Bay Area

In every county except Marin, sales volume declined from January to February, with especially steep drops in San Francisco and Alameda counties:

Change in # of Houses That Sold in February 2011

Redfin’s Bay Area Business Picks Up in March, But April May Be Flat or Down

We expect that trend to reverse in March and early April, as our own Bay Area business has seen two consecutive months of double-digit increases in buyers signing offers.

Beyond April, it isn’t clear whether the rally will continue. Early-stage demand has been up and down: Redfin buyers touring homes spiked 31% in January, then dropped off 8% in February. Over the last two weeks in March, demand has been steady. Bay Area website traffic increased 12% last month, which usually leads to more touring home-buyers down the road.

The jitters in February were probably due to an interest-rate jump in early February that has since eased. More recently though, consumers seem worried about stock market volatility and all sorts of global turmoil.

The Goods Are Odd, Yet the Odds Aren’t Always Good

In the Bay Area itself, the fundamental problem remains a shortage of good-looking homes for sale. There’s still some picked-over inventory from last year, but not much that people want to buy. Homes tend either to sit on the market for a year or sell right away.

“Buyers are being very picky and waiting on homes that are priced right and in good move-in condition,” said Redfin agent Frank Wong. “But when a good listing comes on the market, it usually gets five or seven competing offers, and sells in less than ten days.”

Bidding Wars Still Common

The competition for a small number of listings is creating bidding wars. The sale-to-list-price ratio in February was above 100% for home sales in every one of the core Bay Area counties except San Mateo, which was at 99.2%.

According to Brad Le, leader of Redfin’s Peninsula team, a Cupertino home priced to move attracted 22 offers a few weeks back and sold for about $50,000 above list price. In Santa Clara, a home that was already priced higher than most comparables still attracted six offers and sold for least $10,000 over list price.

Two different Bay Area buyers told me this month that they’re trying to buy a home before Facebook and Zynga IPOs flood the market with new millionaires. Demand is also strong at the low-end, for properties under $500,000; in San Jose for example, Redfin clients just got into a bidding war with half a dozen other buyers. This has always been the case in the Bay Area, where affordable homes are in short supply.

Listing Agents Now Talking to Lenders Before Accepting an Offer

Many of the lower-priced properties being sold today are flips by investors who bought them for cash at a foreclosure auction. When the investor turns around and the sells the place, it creates problems for the lender financing the higher price. Often before accepting an offer, a listing agent will now call the buyer’s lender, to make sure the buyer can come through with the money for the house.

Median Prices Mostly Increase in January

Even though there were fewer home sales, prices mostly increased since January, with the biggest gains in San Francisco and San Mateo counties:

Change in Median Price of Houses That Sold in February 2011

Year over year, prices declined, mostly in the 3% range, consistent with a national decline in prices following the expiration of last year’s tax credit. Marin County dropped a whopping 17.6%, but it’s always more volatile, just because there are fewer sales.

Inventory Mixed as Sellers Hold Out for Better Prices

Inventory was mixed across the Bay Area, with Alameda, Contra Costa and Santa Clara counties down, and the rest up.

Change in # of Houses for Sale on February 28th 2011

The market is very tight just now. There are few sellers and plenty of buyers, but the buyers are very value conscious. As a result, few listing agents want to test the market’s appetite for higher prices, and so many sellers are deciding to hold out a little longer for top dollar. It’s still sort of a stand-off.

“With less demand and less inventory in the past month, we had more competition on each property and fewer sales overall,” said Omar Helmand, Redfin agent for Fremont and Hayward. “The ‘hot properties’ that hit the market received multiple offers. We did not see an overall increase in the number of buyers last month, just an increase in the number compared to how many homes there were for sale.”

And that’s our take on Bay Area real estate for this month. For numbers on every Bay Area neighborhood, download our big spreadsheet. If you have your own opinion on the market, just leave a comment below. And thanks as always for your support!

Best, Glenn
Glenn Kelman | CEO, Redfin

A Sickening Dip, Then Maybe A Jump (Jan. 2011 Insider Report)

Redfin’s monthly Bay Area real estate insider report draws from our proprietary database of information on homes for sale and that just sold, along with insight from our agents to get a sense of what’s going on in the market right now. If you’d like to receive the report via email, just sign up.

Howdy Bay Area Redfin Fans!

The real estate news in the Bay Area was bad in January, with sales volume down as much as 38% and prices down 5% or more. Interest rates just jumped from 4.81% to 5.05%.

So why is everyone at Redfin so bullish? Buyers have come out in force in February, and we may soon see more sellers rise to the bait, putting their homes on the market. The market, at a stand-still since July when the tax credits expired, may finally be moving again.

And Redfin is hiring on all fronts, for Bay Area real estate folks as well as software engineers to help out with Redfin’s Android and iPad applications.

The R&D team recently shipped an online Deal Room to guide our customers through the escrow process, and we just opened in Denver, so there has been plenty keeping us busy.

January Sales Volume Plunges

But let’s not get cocky yet kid! Sales volume plunged in January, with double-digits drops in almost every county.

Change in # of Houses That Sold in January 2011

In our own business, we saw a 39% decline in closings from January to December. This happens every January, but the Bay Area’s drop was the biggest of any of our 16 markets.

On the flip side, Bay Area customers signing offers popped 24%. Since contracts take 45 days to close, we expect Bay Area closings to jump in March, an increase that is mostly seasonal, but still stronger than last year– when signed offers actually dropped in January by 6%.

“January took a dive, but buyers in February seem more motivated than ever,” said Amber Zahn, a Redfin agent for Walnut Creek and Lafayette. “A lot is changing. A single-family home in San Ramon just got 22 offers after only two weeks on the market.”

Early-stage demand at Redfin increased even more, with the number of customers touring homes up 31%:

# of Redfin Bay Area Customers Who Requested A Tour

Customers touring homes are three to six months from a purchase, so the data suggest spring and summer will be strong. While this increase is mostly seasonal, we’ve been surprised to see so much demand this year, because for the first time in two years no tax credit is in play.

Inventory is Mixed

The main problem for many buyers is inventory: for months in most neighborhoods, only a few good homes have come on the market. The problem only got worse in January. Even though January sales volume was low, in some cases the number of homes being listed was even lower, driving inventory declines:

Change in # of Houses for Sale on January 31st 2011

“Willing and able buyers are numerous,” said Mark Biggins, Redfin agent for Oakland and Berkeley. “The problem is that quality inventory is sparse in the Oakland and Berkeley Hills. When a desirable, well-priced home hits the market, you can expect multiple offers within two weeks.”

But we expect the supply of homes to jump in March. “We’re getting more listing appointments now,” said Brad Le, Redfin team lead for the Peninsula. “And the buyers too are definitely out a bit earlier than in years past. This probably has something to do with three weeks of 70-degree sunshine and rising interest rates.”

“I’m seeing homes that have been sitting on the market for a while start to sell,” Brad continued. “And of course any turn-key, well priced home usually goes pretty quickly, especially in Cupertino, Palo Alto and Foster City. Homes in strong school districts always get a bit crazy because listing agents love to list the homes way below comps, sometimes $100,000 off.”

Prices Fall 4% to 14% in January

Despite the escalating demand we’re seeing in our own business now, our data for January show that prices fell last month, from 4% to 14%:

Change in Median Price of Houses That Sold in January 2011

Part of the issue was that the homes selling at the turn of the year had been on the market for a while, and were priced to move. Part of it was just that December demand was weak. The swings in the market have put everyone on edge.

“First-time buyers are coming out of the woodwork, many of whom had worked with us before the holidays,” said Martin Garcia, Redfin agent for San Jose and Sunnyvale. “Most of the newer buyers are quick to tour and quick to make an offer, but often at a very aggressive price. These are buyers who need plenty of support, which my team is happy to give. And they have lots of anxiety: I am getting the question ‘what do you think the market is going to do?’ a lot more often.”

We hope we helped you answer your own questions about the market’s direction. If you want to see the raw data, for every neighborhood and every county in the whole Bay Area, just open the spreadsheet. We also publish our methodology for gathering and analyzing data here.

If you have your own opinion on the market, just leave a comment below! Thanks for using Redfin, and thanks for your time.

Best, Glenn
Glenn Kelman | CEO, Redfin

Bay Area Sales Drop, But Sellers Don’t Flop

Howdy Bay Area Redfinnians!

Don’t believe us? Good. Buying a home is too important not to think for yourself about it! Read on for the nitty-gritty…

Prices Mixed, Mostly Down

August prices were mixed in the Bay Area, with four of six counties reporting price drops:

The data suggest San Francisco was a bright spot, but based on the lackluster demand Redfin agents have seen there this August, the numbers probably reflect a shift in sales volume toward ritzier homes, rather than a true price increase. Even further down the Peninsula, in markets like Palo Alto that have traditionally bucked nationwide dips, prices have begun to decline.

“In the last two weeks of August, we had a flurry of 14 offers go under contract in time for the start of school, but since the beginning of September we’ve had only three,” said Brad Le, the leader of a team of Redfin agents in the Peninsula.

The South Bay on the other hand has experienced strong demand. In Milpitas and in San Jose neighborhoods like Evergreen and Willow Glen — as well as in parts of Fremont — at least half of Redfin’s home-buyers faced competitive offers. “This is the one place right now where buyers have been coming out of the woodwork,” said Miawand Bayan, who leads a team of Redfin South Bay agents that genuinely seemed startled by the low numbers.

For a Second Straight Month, Double-Digit Declines in Sales Volume

For the Bay Area overall, we think prices will continue to drop, mostly because demand is so soft. Like Alice on her trip to Wonderland, August sales volume fell by double-digits for the second straight month. Only San Francisco and Contra Costa counties were relatively stable:

Some of this decline is related to a double-whammy of expiring federal and state tax credits, and some is seasonal. Mostly, sales are dropping because buyers have lost confidence, and sellers don’t have enough equity to lure them back with price drops.

Plenty of Buyers, But “No Urgency Whatsoever”

For the week ending Saturday, September 11, the number of offers handled by Redfin’s Bay Area agents declined 14% compared to the four-week average, and many of those offers were only half-serious. Some of this was due to the Labor-Day weekend, but what’s really strange about the decline is that the number of buyers in the market has remained steady, with traffic up this month and new customers declining only slightly.

“We’re working with plenty of buyers,” said Catherine Jardine, manager of Redfin’s Bay Area business. “They just have no sense of urgency whatsoever. When this many people are looking, things can change fast. Right now, I just don’t see what will spark that change. Realtors talk about rising interest rates, but after such a long period of low rates, we all feel like Chicken Little.”

The only time buyers are moving quickly is when inventory is scarce. In the city, where neighborhoods separated by a small hill are worlds apart, the laws of supply and demand work in fluky ways. For example, in Bernal Heights, few would-be sellers have been willing to test the market. Now as a result, Redfin has 15 clients actively looking to buy a home, nearly all of whom tried to pounce on the one new listing that came out before Labor Day, which was immediately snapped up. Other neighborhoods closer to the freeways have the same problem, with few houses featuring a flat lot and a family-friendly floor-plan.

In most areas, buyers are pickier. “The San Francisco market is a real freak-show right now,” said Gina Pio Roda, the leader of Redfin’s San Francisco team. “The buyers who are making offers are asking for 15% – 20% discounts, which sellers seem completely unwilling to consider. Even the sellers who could afford a discount that big would rather put it out to the whole market before giving it to one buyer.”

Where There Are Willing Sellers, Deals

San Francisco’s limited sales activity is mostly restricted to South-of-Market and South Beach condos, where turnover is high. Some of the folks who bought four years ago when these buildings first went up are now trying to sell, even as low occupancy rates have led foreclosure-wary lenders to require 20% down-payments.

60-Day Short Sales

One recent change in the market: short sales, where the seller’s asking price is below what he owes on the mortgage, are getting easier, mostly because the big banks are moving faster to approve the deals. Wachovia is still the easiest bank to deal with, but Wells Fargo, Citibank and even Bank of America are moving faster too, often taking 60 days from the initial negotiation to the close of escrow; a year ago we saw these deals taking six months or more.

Sellers Withdraw from the Market

We still think more people would buy homes if there were more homes to buy. The August number that surprised everyone at Redfin was the decline in the number of houses for sale. When sales slow this dramatically, inventory usually piles up. But in most counties, inventory actually declined 5% – 7%:

Many of the houses that are for sale are leftovers from the summer, and look like it. The rest of this summer’s sellers boarded up for the winter, pulling their properties off the market. Unless interest rates begin to rise, the waiting games that sellers and buyers are playing will likely last until next spring. Until then, the market will be hard to call: when sales volume is low, prices can move around a lot based on a few data points, but it doesn’t mean much.

Phew! That’s it for another Redfin report. Any questions? Just leave a comment! And if you’d like to see the raw data, broken down by every neighborhood, download our mongo spreadsheet. Thanks for all your support!

Best, Glenn
CEO, Redfin

Are Sellers Avoiding Buyers Using FHA Loans?

Redfin’s superstar team of Bay Area agents noticed a couple of interesting phenomena just in the past few days:

1. Demand is way up: 57 clients made offers last week. Many of these are either in the $400K – $600K (folks buying the most affordable properties they can) range or above $1M (folks with plenty of money).  Not much in between. A lot of the demand is in the East Bay, where prices have fallen the most.
2. FHA loans – which are government-insured loans for folks who can’t afford a 20% down-payment or who are self-employed — are putting buyers at a disadvantage because sellers prefer buyers with conventional loans. The problems sellers have with FHA loans are that the appraisals are more strict — a deal can fall apart if the house doesn’t appraise at the purchase price — and the loans take longer to fund. Banks selling foreclosed properties (aka REO listings) balk at FHA financing because the FHA guidelines require the listing to be in working order, and many foreclosed properties need repairs. If you’re bidding on a property and you have FHA financing, you may need to offer a bit more.
3. Many REO listings appear in the MLS — and thus on all the brokerage websites — as active on the market but have been off-market for days. The agents who work with banks to sell REO properties, may list 50 – 75 of ‘em at one time, and they get behind. It may also be that the bank takes a while to consider all offers, so the listing agent has good reason to leave the property as active. Now, before we even tour an REO listing, we now confirm with the listing agent that it’s still really on the market. Of those 57 offers we got last week, about 15 were on REO listings that were no longer taking offers.
4. Competition is intense in the Bay Area right now. We’re seeing a lot of bidding wars that result when the seller — often a bank — intentionally under-prices the listing to create an auction-effect among buyers. Listings that get 3 – 7 offers often seem to go for 5% – 6% over list, and  listings with 10+ offers are going for 10% – 20% over list.  Totally unscientific, but it’s what we’re seeing. Again, we like to call the listing agent to see what has come in, and to hold off on making our offer until we’re right at the deadline, so our client has the most info.

Anyway, that’s what we’re seeing. Anyone out there planning to use an FHA loan, let us know what your experience has been!

Update: Redfin’s Chelsea Mitchell notes that there’s a good discussion in the Seattle Redfin Forums about new (as of April 1) FHA guideliness for appraisers in a declining market — almost all markets are now considered declining — which explains why the FHA process has gotten more cumbersome and sellers have gotten more leery of offers funded by FHA loans.

The New Sweet Digs

Dear Bay Area Sweet Digs Readers,

As part of changes already announced two weeks ago, Redfin is changing up Sweet Digs to focus the format on proprietary, leading-edge indicators of what is happening to home prices in the Bay Area.

Up to now, we had tried to provide a personal review of individual homes for sale in the area, but as a broker and an MLS member, we were not in an ideal position to be objective about other brokers’ properties. We also found that the scale of the Bay Area required an army of writers.

The new format will largely focus on publishing pricing data to which we have unique access:

• Broker-only data on transaction-volume, median-price and inventory trends;
• Broker-only data on sale-to-list ratios by neighborhood;
• Redfin-only price-drop data, showing what neighborhoods have the highest fraction of price-reductions;
• Redfin-only reports on shifting search traffic patterns and price parameters;
• Local agent round-ups about how current-week offer dynamics anticipate pricing shifts;
• Analysis of Case-Schiller, Census and National Association of Realtor data.

We have been preparing a change in format for several months, informed by a survey many of you completed earlier this summer, so we have reason to believe that you’ll like the new Sweet Digs.

And we know you’ll keep foraging for all types of real estate information on your own.

Many of the writers who contributed hyper-local neighborhood and home reviews to Sweet Digs are up to the same tricks, on newly launched blogs of their own. The great Tracey Taylor, for one, is already up and running with an East Bay real estate blog, with continued support for Sweet Digs via cross-linking and occasional cross-posting.

We’ll keep you posted on other new real estate blogs as they launch.  For now, we just wanted to say thanks to the folks who helped us get Sweet Digs this far, for your dazzling wit and insight, your verve and dedication to your craft. And thanks to our readers for your steady support!

The new, more analytical blog posts start later this week. If there’s a particular type of analysis you’d like to see, just leave a comment to let us know.

Regards, Glenn

Glenn Kelman, Redfin CEO

Silicon Valley: Land of the Haves and the Have-Mores

BusinessWeek reported today that the area of the United States where the disparities in home prices were the narrowest were in Silicon Valley’s San Jose, Santa Clara and Sunnyvale. This wasn’t because the most expensive homes weren’t expensive; in fact the Silicon Valley homes priced in the 99th percentile were more expensive than the 99th percentile in Miami ($2.5 million vs. $2.2 million), which had the greatest disparity in home prices. What made Silicon Valley so egalitarian was that the median home price was $745,000.

Redfin Bay Area Customers Hit the Airwaves!

After a few anxious, quiet weeks following our May 31 Bay Area launch, Redfin Direct’s California business has really started taking off, with over thirty offers submitted through Redfin Direct, and our first two deals already scheduled to close. We’ve also got a bunch of California listings.

One of our first Bay Area customers, Colleen and Scott Barneson, were on the news the other night. Lead California agent Rosemary Vo got it Tivo’d and Bahn Lee loaded it up onto the Web. Seeing it on YouTube, I kept waiting for somebody to start lipsynching. But then I remembered that real estate is a serious business…

The segment compared the service a Redfin customer gets with what the customer of a traditional agent gets. The upshot was that Redfin is a good deal if you feel comfortable picking out the property on your own (or, as we like to put it, without any pressure).

This little segment actually says a lot about what kind of person buys a house online. The traditional agent’s customer was buying as a single person, whereas the Redfin customer was actually a couple. The traditional agent’s customer was new to the area, whereas the Redfin customer knew Danville pretty well. So you can see how it probably made more sense for the couple, who could talk to each other about the property, to work with an online brokerage like us. And, we have to admit, it isn’t such a leap to understand why that nice, lonely guy might have a perfectly good reason to use a traditional agent to drive him around Berkeley.

If you’re into Redfin, and you want to make your own video — especially if you want to spice things up a bit — let us know and we’ll send our YouTube crew your way!

Inman Conference Report: Realtors Gone Wild, Redfin Wins Most Innovative B-Model

Inman’s big Connect conference kicked off today in San Francisco. It isn’t raining here, but the city was pretty all the same:

For starters, TechCrunch’s Michael Arrington threw Molotov cocktails for an opening keynote at the new geek side of the conference, Inman’s Connect Tech, bringing in a dump-truck of ideas about everything that is happening on the Web to open things up for consumers.

We were glad to see such a good turnout, maybe 200 people, for an event that we’d cooked up with Inman only a few months ago. One day, maybe it’ll be as big as Connect, the event for agents. Mike (pictured above at left) stayed up the night before writing his speech, confirming the impression he made earlier of being an overgrown, talented kid, shy when he isn’t being startling.

What worried me was that instead of all the industry types barfing on Mike’s ideas, as I think they would have done last winter in New York, everybody was writing down what he said, or even worse, volunteering “we’re doing that now!” (Redfin is going to have a run for its money). The best part was when somebody said the Salt Lake MLS had allowed them to combine its data with for-sale-by-owner listings, only to have the Salt Lake MLS stand up and say “Not anymore.”

I kept looking over at the mild-mannered Inman CEO Mike Edelhart, to see if he would blanch at the controversy, but he was thrilled, engaged; good journalists never die, even when they become CEO’s.

The map guys didn’t say much new, but probably gave another 50 entrepreneurs enough encouragement to put listings on a map. Redfin was on a tame standards panel. Later on, Craigslist’s Craig Newmark stood on the other side from us of a large plant but nobody had the guts to say hi. We all felt pretty glum about being so chicken until Rob McGarty, who screwed up royally converting everyone to Treo’s, said “Hey, he’s using a Treo.”

The main event, Inman Connect, was a mob scene, with people jammng the doorways of a huge ballroom. I missed Brad Inman’s keynote speech about transparency because of a meeting that ran late, but Zillow’s blog hits the high points.

Zillow’s main men, Lloyd Frink and Rich Barton, gave an utterly charming presentation about what they learned over the past six months, consisting mostly of funny pictures. They introduced a neat feature for getting Zestimates by e-mail and opened up their API, which maybe we’ll use to put more data on our map.

They said they’d never be a brokerage, which is always nice for us to hear. They showed a slide of a house with a “Buy It Now” button next to it that kind of reminded me of our site. It was supposed to be an example of what not to do. The audience roared. The lady next to me craned around to see the look on my face. Note to self that we really need to change that Buy It button to something like Start Offer…

From the forum on journalism, I really liked Lockhart Steele’s comment on community features, that you should assume people are intelligent, so much more so than computers, and not worry that they might say something crazy, vengeful or stupid (though that’s fun too).

I ran into anti-realtor legal gadfly extraordinaire David Barry, wearing another scintallting shirt open at the chest, who said he felt “so energized coming to tradeshows.” I looked at him, not for the first time, with wonder.

We won an award for most innovative business model, which we’ll announce tomorrow. Winners in other categories included Trulia, Zillow, RE/MAX, Urban Digs, Cell Signs. I had set aside my laptop and patted my hair down when the envelope for our category was being opened, only to see Rob and Eric Heller jump up like Academy Award-winners on hearing our name, and take the stage to get their photos taken with Jessica Swesey. This was awesome.

We got invited to a swanky party at an expensive house up for sale but I didn’t go.