Everybody is talking about how crazy the current real estate market is. But few people analyze and try to understand it. The frenzy started with the sharp turn from a buyer’s market in the end of 2011 to a seller’s market in the first quarter of 2012.
During the buyer’s market in 2010-2011, I wrote many newsletters and blogs to talk about the lifetime opportunity to acquire properties (see for example, Why it is time to buy?). The name of an investment entity (Realty Asset Acquisition) I established during then came from this idea, which I called the period ‘acquisition mode’. The first quarter of 2012 is what I called a market ‘turning point’. At the time, the inventory was at its minimum, i.e., sellers not wanting to sell any more, causing a sudden jump in home prices. I had tried to explain to my clients that a seller’s market began, during which more inventories will come to the market at the expense of higher prices. I further explained that the right approach would be ‘not panic’, but ‘actively looking to find the right home’. It was a little tough during the turning months of Q1 last year, but starting May, I was able to help several clients buy every month and most importantly with very good prices.
Unfortunately many buyers failed to understand the market and got panic after the market turning point caught them surprise. This is precisely what happened to a buyer I worked with in Dec. 2011 for the home in the picture above. By any means, this was a solid home for 915k for a short sale. The home did not have foundation problems. The buyer backed out due to termites found even after I explained that this is a million dollar home and will make him lots of money with everything said and done. In early 2012, the market got hot and after losing a bid, the buyer went on to buy a home with foundation issues on a major street next to apartment buildings for a high price at the time with another agent. Ironically, earlier this year, they had to vacate their home for termite problems. How much did this buyer’s current home appreciate? The buyer paid 1.08M a year ago and last month 257 Killdeer, the same model sold for 1.12M.
Showing yesterday, a client said that you could have bought anything then and still made money. Apparently, even when the market is up and hot, not all houses appreciate at the same rate. Recently I checked on the last thirty homes I helped clients purchase prior to this year. The average increase in price is about 32%. The short sale and bank owned properties (http://www.andygan.com/foreclosure) we bought had a much higher price increase, ranging from 30-70%. Even this year, several homes I helped clients purchase already went up over 10%, not including the short sales. The secret is, ‘Real Value’!
This year happened so fast for me since the holidays and I haven’t had a chance to reflect on last year’s work until now. In this series of posts, I’ll discuss the current Bay Area market as a whole and examine both buying and selling side of the market.
First, a delayed thank you to all my clients, friends, family, and colleagues for your continuous support of my business. Your business, referral, word-of-mouth have enabled me to have another record year in 2012 earning a consecutive President’s Club membership and a record start in 2013. I am proud to say that your support and trust has validated my business model of ‘Providing Real Value‘. It motivates me to strive to the ultimate goal in the business, help my clients build wealth through real estate.
640 Pegasus Ln
Virtual Tour at www.640Pegasus.com
With both interest rates and housing inventory staying low, housing prices in the Peninsula continue to appreciate following the uptrend from last year. The homes fitting the needs of first time buyers are attracting the most buyers. Multiple offers are now the norm in this market, which often drives up final sale prices. For this townhouse in Foster City, I listed it at 748,000 and sold it at 792,000. The unit price of $538/sqft is a new record since 2007 for Foster City townhomes.