Biggest Discounts (Late) August Update

Let’s check (a rather bit late) in on our stats once again and find out where buyers are currently getting the biggest discounts off asking price. If you are a potential buyer, this will help you to know which neighborhoods may be softer in terms of sale price discounts off list price, and help you know where to look for potential bargains.

In the charts below, we have taken all sales data from last month in the Bay Area and sorted it by city. We calculated the overall difference between the sale price and the list price. Note that this reflects the final list price, after all price drops in the listing. Any areas with fewer than ten sales are excluded from the top and bottom ten rankings, but interested readers may download the full data summary in Excel format (xls).

Here are the top ten areas with the largest overall discount:

The overall discount rate dropped slightly from June to July, moving from 2.0% to 1.8%.

Here are the ten areas with the smallest discounts:

In the 72 areas we ranked, the median discount was 1.3%.

Is the area you’re shopping not on either the top 10 or bottom 10? No problem, just download the full rankings in Excel format and hit the “FullSummary” sheet.

Of the 4,629 sales we tracked in the 1-month period, 929 homes sold for 5% or more off the asking price, while 991 homes sold for 5% or more above the asking price.

First-Time Buyer Hoping To Get The $8,000 Tax Credit? You Have Four Weeks To Find A Home

The federal government is offering first-time home-buyers a tax credit of 10% of a home’s sales price up to $8,000. To qualify, you must close on a home by November 30th; if you close on December 1st, you’re out of luck.

If you’re a first-time buyer in the Bay Area, you have a month left to find a home, make an offer and negotiate terms if you hope to close in time to get the $8,000 tax credit.

Close By November 13th

In a normal month, about 20% of closings slip from the last week of a month to the next. This number will almost certainly be higher in November due to the expected rush of buyers trying to get the tax credit and because November 30th falls on the Monday after Thanksgiving.

If you’re hoping to get the tax credit, you want to make sure you’ve closed before the week of Thanksgiving because it’s not a full work week:

• Wednesday, November 25th: A furlough day in Contra Costa County, the county offices will be closed.
• Thursday, November 26th: Turkey day. A day to give thanks and watch the Detroit Lions go for six Thanksgiving Day losses in a row.
• Friday , November 27th: San Francisco, San Mateo, Santa Clara, Alameda (.pdf), Contra Costa & Marin county offices are closed.
• Saturday & Sunday, November 28th & 29th: The banks aren’t open so you can’t close.
• Monday, November 30th: The last day to close and qualify for the first-time buyer tax credit. It’s going to be a goat rodeo.

To give yourself the best chance of getting the tax credit, plan on closing by November 13th. If you run into any problems during closing, you’ll have more than a week to work things out and still qualify for the tax credit.

Get An Offer Accepted By October 9th

Right now, it’s taking our Bay Area clients an average of 35 days to close once they reach initial agreement on terms. It’s taking 57 days for clients who purchased their homes with FHA loans. This means if you want to close by November 13th, you need to get an offer accepted by October 9th if you have a conventional loan or September 17th if you have a FHA loan.

For more information, check out the Home Buyer Tax Credit FAQ from the IRS and get all the details about the tax credit from the agency giving the credit. Also, check out the report that this program may be extended.

Find A Home You Like

Don’t rush into a purchase. Make sure you’re buying because you’ve found a home you want to live in, not because you want the $8,000. You don’t want to end up in the wrong house in the wrong neighborhood with the wrong commute just for a few thousand dollars.

Case-Shiller: Nationwide Markets Simultaneously Bouncing Up

It’s time for our monthly check-in of the S&P/Case-Shiller Home Price Indices (HPI). For the full source data behind this post, plus seasonally adjusted and tiered price data, hit the S&P/Case-Shiller website. For an explanation of how the Case-Shiller data is calculated, check out their methodology pdf. Also remember that the data released on the last Tuesday of a given month is for the period two months prior (i.e. – June data is released in August).

Here are the basic Case-Shiller stats for the Bay Area* as of June:

Sixteen of the twenty metro areas tracked by Case-Shiller saw an increase in their respective seasonally-adjusted HPIs between May and June. Only Las Vegas, Detroit, Seattle, and Charlotte still saw seasonally-adjusted drops month-to-month.

San Francisco is showing the strongest bump this spring of the eight Case-Shiller-tracked markets that Redfin services, having increased nearly 6% since March.

Here’s a chart of Case-Shiller HPIs for all the markets that Redfin serves:

Here’s our peak decline chart, in which we line up the peak Case-Shiller HPI value for each of Redfin’s markets, so we can see how long each market has been declining, and how much it has dropped from the peak.

It’s quite noticeable in both of the above charts that almost every city we’re tracking seems to have taken a sudden upward turn with the most recent few months of data. Despite the fact that there was a nearly two year spread in when the various markets hit their peak (Boston in September 2005, Seattle in July 2007), nearly every market appears to have turned a sharp corner to the positive after “bottoming” in March or April.

A commenter on my Seattle site made an astute observation about this phenomenon this morning:

Since it is still essentially true that “real estate is local”, what could cause every city to suddenly and simultaneously reach an equilibrium point where prices reversed course?

Answer: it just so happens that the home buyers’ tax credit was enacted with the American Reinvestment act (stimulus package) effective February 17, 2009. March 2009 was the first full month that American home buyers had the tax credit as an incentive. It changed their behavior and made them buy homes. It also expires on December 1, 2009 unless it is extended.

Once again, government policy is impacting asset valuations. Either we’re seeing a lasting nationwide housing bottom marked by an extraordinarily well-timed tax incentive, or a new “bubblet.” Case Shiller won’t tell us which until 2010.

It remains to be seen whether the NAR’s lobbying efforts to get the $8,000 tax credit extended beyond November will be successful. And even if they do convince Congress to extend it, the effect may be largely diminished. The program may have already pulled forward as many sales as it can during its spring and summer run.

*[Case-Shiller defines the San Francisco Bay Area as the San Francisco-Oakland-Fremont, CA Metropolitan Statistical Area, which includes all of the following counties: Alameda, Contra Costa, Marin, San Francisco, and San Mateo.]

Multiple Offers On The Peninsula

Jim Holt, our all-star agent on the Peninsula, has seen of lot of multiple offer situations over the last few weeks.

Recently, there haven’t been a lot of new listings and a lot of buyers have seen everything that’s for sale. So when a nice home comes on the market with a good price, it’s going to get multiple offers and probably sell over list price. This is especially true for entry- and mid-level homes in Palo Alto, Menlo Park and Mountain View.

If you’re bidding on a home with multiple offers, Jim says it’s critical that you lead with your best offer:

You need to approach the offer with the mindset that this is your only shot. It’s likely the sellers will counter only the strongest offers and ignore the rest. Make sure you’re comfortable with the offer price because if you offer is accepted, you don’t want to question if you overpaid. At the same time, you don’t want to be kicking yourself if you lose by only $5,000 – $10,000.

Ignore List Price

Jim’s advice to anyone looking on the Penninsula right now is to forget about the list price:

List price is a meaningless number. If a home is overpriced, it will sit on the market for a while, then sell below list price. If a home is underpriced, it will get multiple offers and sell over list price. Remember, market value is based on what people paid, not what sellers asked. You need to look at sales prices for comparable homes that sold in the last three months. Anything older is too stale to be useful.

What are you seeing in the housing market on the Peninsula?

The Market Wrap-Up For July

Let’s take at look at some July numbers for single-family houses and condos that sold in the Bay Area and see how they compare to a year ago.

San Francisco

• 454 homes sold in July
• The median sales price was $642,426, down from $770,000 in July 2008

San Mateo County

• 581 homes sold in July
• The median sales price was $575,000, down from $701,000 in July 2008

Santa Clara County

• 2,028 homes sold in July
• The median sales price was $487,000, down from $615,000 in July 2008

Alameda County

• 1,699 homes sold in July
• The median sales price was $340,000, down from $445,000 in July 2008

Contra Costa County

• 1,816 homes sold in July
• The median sales price was $260,000, down from $350,000 in July 2008

Marin County

• 241 homes sold in July
• The median sales price was $650,000, down from $777,500 in July 2008

We got these numbers from DQNews.

Dig Deeper Into the Trends

These numbers are for county-level trends in the Bay Area. To see what’s happening in your neighborhood, check out our stats & trends pages.

This is our first monthly report on the inventory trends in the Bay Area. What numbers would you like to see in our August wrap-up?

Redfin Open House This Weekend: Craftsman Charmer in Menlo Park

Come out and tour this beautiful older home perfect for a family in Menlo Park.

Open House Dates and Times
Saturday August 15th from 1 p.m. – 4 p.m.
Sunday August 16th from 1 p.m. – 4 p.m.

302 Pope St Menlo Park, CA 94025
Priced at $1,499,000
3 BR/2 BA
Listing Agent: Jim Holt

Coffee shop of choice
Coupa Cafe

Favorite Restaurants in the Area

• Left Bank
• Angelo Mio
• Osteria
• Tamarine

Favorite Places to Go
Running the Stanford Dish, Biking Old LaHonda Road, Walking to Downtown Palo Alto

Best Features of Your Home
Its craftsman charm with high ceilings, clear redwood framing, quarter-sawn floorboards, grand porch and balcony. So convenient to get anywhere in the Bay Area.

Favorite Room in the House
I’d have to say the dining room; simple, open, bright, and we’ve used it for dinner every night as well as for parties.

Any Remodeling Since You Purchased the Home?
We’ve done a lot of work on the house – rebuilt the garage and balcony, remodeled the kitchen and downstairs bathroom, and redesigned the fireplace mantle, but we’ve always been careful to preserve the character of the 99-year-old house.

What’s in the Neighborhood
Around the corner there’s a small supermarket, coffee shop, dry cleaners, day spa. Plus there’s a nearby deli and city park with playground, dog run and tennis courts. The neighbors are all very friendly and supportive with many young families.

Most romantic spot in the home or neighborhood
The porch swing for two at sunset, with a glass of wine!

What Will You Miss Most?
We’ll miss being here for the house’s 100th birthday, she’s a Grand Old Lady to us. We’ll miss the neighborhood pancake breakfasts, yearly BBQ, and potluck dinners. We’ll miss being so close to downtown Palo Alto. We’ll miss how the big trees keep the house cool on hot days. We’ll miss sitting on the porch and waving to the neighbors as they walk their dogs and push their strollers.

Stories from the Field: Multiple Offers in the Bay Area

Last week we reported that in June, 84% of the homes our clients bid on in the Bay Area had multiple offers.

To shed some light on what’s going on in the Bay Area real estate market right now, let’s take a look at three homes with multiple offers that Redfin clients bid on:

Berkeley: Single-Family House

• 2 beds, 1 bath
• Listed on July 14th at $495,000
• Regular sale: not bank-owned, not a short sale
• Sellers reviewed 15 offers on July 23rd

Our client offered $525,000 with a 10% down payment.

The Result
The property went to another buyer for over $545,000 within 10 days of going on the market.

Union City: Single-Family House

• 3 beds, 2 baths
• 1,250 sq. ft.
• Listed on June 25th for $289,000
• Bank-owned property, listed with no reports or disclosures and “as-is,” meaning the buyer is responsible for any repairs
• The bank received 17 offers by June 29th

Our client offered $350,000 with a 10% down payment.

The Result
Our client won the property, but just barely. There were two other offers around $350,000.

San Jose: Condo

• 2 beds, 2.5 baths
• 1,100 sq. ft.
• Listed on June 19th for $192,000
• Bank-owned property, listed “as-is”
• The bank received 16 offers by June 28th

Our client offered $222,000 in cash with a 10-day closing period and no contingencies.

The Result
The bank accepted a higher cash offer from another buyer.

Things Are “Stressful And Frustrating” For Buyers

In the rejection letter the bank sent our client who bid on the condo in San Jose, the bank wrote:

[Y]ou undoubtedly have been experiencing this type of ‘Bidding Frenzy’ that has been stressful and frustrating for all concerned. As long as demand exceeds supply, this frenzy will continue and your clients will continue to be in a stressful situation […]

Generally, the most competitive offer is not restricted only to the highest price offered. There are various factors that the bank will consider in making their selection. These include price, terms, deposit, down payment, type of loan, and the various contingencies involved.

Have you had similar experiences?

Case-Shiller: Bay Area Home Prices Continue Spring Movement Up

It’s time for our monthly check-in of the S&P/Case-Shiller Home Price Indices (HPI). For the full source data behind this post, plus seasonally adjusted and tiered price data, hit the S&P/Case-Shiller website. For an explanation of how the Case-Shiller data is calculated, check out their methodology pdf. Also remember that the data released on the last Tuesday of a given month is for the period two months prior (i.e. – May data is released in July).

Before we dig into the data, I’d like to make a brief mention of an excellent post over at the economics website Calculated Risk: A Few Comments on Housing Reports. Quoting from his post:

…the Case-Shiller report today really bothered me. To be more accurate, the reporting on the Case-Shiller report bothers me. As I mentioned earlier today, there is a strong seasonal component to house prices, and although the seasonally adjusted Case-Shiller index was down (Case-Shiller was reported as up by the media) – I don’t think the seasonal factor accurately captures the recent swings in the NSA data.

Keep in mind that the Case-Shiller data that most of the media (including this blog) are reporting on is usually the raw index data. As CR mentioned, the housing market is a very seasonal beast, so it’s difficult to draw any meaningful conclusions from month-to-month changes, unless they are far outside the norm for that time of year. This is why we consistently report the year-to-year change in our summary.

Now that we’ve got that out of the way, here are the basic Case-Shiller stats for the Bay Area* as of May:

May 2009
Month to Month: Up 1.4% (raw)
Month to Month Up 0.7% (seasonally adjusted)
Year to Year: Down 26.1%
Change from Peak: Down 45.0% in 36 months

The following chart shows the Bay Area HPI scaled such that the May 2006 peak is 100% on the y-axis. Data on the x-axis is scaled to display the last time (pre-peak) the Bay Area HPI was at or lower than it was in the latest data (August 2000).

(All of the charts below are based on the non-seasonally-adjusted Case-Shiller HPI data.)

We definitely appear to be seeing something in the May data that is a little stronger than the spring non-bounces that have hit the Bay Area the last two years. Of course, the current uptick could still be largely seasonal…

Here’s a chart of Case-Shiller HPIs for all the markets that Redfin serves, so you can compare San Francisco’s performance to other areas across the country:

And here’s our final chart, in which we line up the peak Case-Shiller HPI value for each of Redfin’s markets, so we can see how long each market has been declining, and how much it has dropped from the peak.

It’s also worth keeping in mind that in addition to being from a usually-strong time of year, these numbers represent home sales that closed during the frenzy of interest rates in the fours and the debut of the $8,000 first-time homebuyer tax credit. In my opinion, we won’t really know if home price declines are mostly over until we see the data from October / November. And that advice is worth exactly what you paid for it ;^)

*[Case-Shiller defines the San Francisco Bay Area as the San Francisco-Oakland-Fremont, CA Metropolitan Statistical Area, which includes all of the following counties: Alameda, Contra Costa, Marin, San Francisco, and San Mateo.]

Biggest Discounts July Update

Let’s check in on our stats once again and find out where buyers are currently getting the biggest discounts off asking price. If you are a potential buyer, this will help you to know which neighborhoods may be softer in terms of sale price discounts off list price, and help you know where to look for potential bargains.

In the charts below, we have taken all sales data from last month in the Bay Area and sorted it by city/town. We calculated the overall difference between the sale price and the list price. Note that this reflects the final list price, after all price drops in the listing. Any areas with fewer than ten sales are excluded from the top and bottom ten rankings, but interested readers may download the full data summary in Excel format (xls).

Here are the top ten areas with the largest overall discount:

The overall discount rate dropped again from May to June, moving from 2.7% to 2.0%. Walnut Creek dropped from #1 last month to #13 this month, while Mill Valley moved up from #3 to #1.

Here are the ten areas with the smallest discounts:

Of the 58 areas we ranked, 14 came in in with an average sale price above the average list price.

Unfortunately the data I was given this month did not have the original list price for all Bay Area regions, so I can’t repeat the third chart from last month.

Is the area you’re shopping not on either the top 10 or bottom 10? No problem, just download the full rankings in Excel format and hit the “FullSummary” sheet.

Of the 3,847 sales we tracked in the 1-month period, 330 homes (9%) sold for 10% or more off the asking price, while 686 homes sold for 5% or more above the asking price.

84% Of Offers Are On Homes With Multiple Bids

We were surprised to see that only 84% of the homes our clients bid on in June had multiple offers. Our agents say it feels like every home for sale has multiple offers on it. In June, our Bay Area agents presented 73 offers to listing agents and 61 of those, or 84%, were on homes with at least one other offer, up from 69% in May.

In the East Bay, many of the homes with multiple offers are bank-owned properties that have been priced way below market value to attract a lot of offers and create a biddingwar to drive the price up. Now individual home sellers are catching on to this strategy. According to one of our East Bay agents Charmaine Frank:

Sellers have begun to realize if they want their homes to sell, they have to compete with the bank-owned homes. Any home that looks like a deal is going to have multiple bidders and will sell for much more than the list price.

In San Francisco, good homes with competitive prices are getting a lot of attention from buyers. Redfin’s agent in San Francisco Gina Pio Roda says:

Listing agents in the city know the summer is key and they’re making sure homes are well priced. Over the last few weeks, I’ve seen a lot of multiple offers in Noe Valley, Glen Park, Outer & Inner Sunset and Parkside.

On the Peninsula, the jump in listings with multiple offers is due to families trying to buy in between school years. According to our Peninsula specialist Jim Holt:

The summer market is competitive. For parents with school-age kids, it’s much easier to move when school’s out. Right now, I’m seeing lot of competitive offers in areas with well-regarded school districts.

When bidding on a home with multiple offers, buyers need to put their best foot forward and make every part of their offer competitive, not just the price. Jim advises his clients to “show the seller you’re serious right from the start because sellers often counter only the best offer.”

If you’re bidding on a bank-owned home with multiple offers, here’s some advice from Miawand Bayan, our agent who covers the East and South Bay:

You may have to get pre-approved with the bank that owns the home. Bank-owned homes, especially in the East Bay are getting a lot of attention from buyers — in some extreme cases, there have been over 70 offers on the same bank-owned home. It’s easier for the bank selling the home to evaluate all the offers if the bidders have been pre-approved through their own mortgage department. You don’t have to use the bank for your mortgage, but they often offer some incentives worth considering.

What are your experiences bidding on homes with multiple offers?