SF Over Asking Prices Are Down
San Francisco Houses sold for less over asking in 2016 than they did in 2015. Buyers are purchasing houses with offers that are a smaller percentage over the listing price than they have been in recent years.
Does this mean the sky is falling? Is a real estate bubble bursting?
I don’t think so. Here are some thoughts I had about what this graph represents.
The first thought I had was this could mean listing agents in conjunction with sellers are changing up their pricing strategy, pricing houses closer to their true market value. In turn, this can mean home appreciation is slowing down. When the real estate market is truly hot there isn’t much to lose by pricing a house low and expecting multiple offers. When the market gets a bit soft, though, pricing low can be a risky strategy. If for whatever reason an offer date is set and no offers appear, the listing agent may have set the market value with a low listing price. A price the seller may not be willing to accept an offer at. To hedge this bet, listing agents will start to set list prices closer to the expected final sales price leading to houses selling for a smaller amount over the asking price.
An other thing I have noticed about list prices in our current market is the more deficiencies a house has (Bad layout, no parking, unfortunate location etc) the closer to the expected real value the seller’s agent will set the listing price. With a higher list price there is little expectation of offers well over the asking price.
It is difficult to predict how buyers will react to a house’s short comings. I recently sold a house in the Inner Richmond across the street from Safeway. I felt it was somewhat of a wash in that, yes there was a Safeway across the street, but it is also quite convenient to have a grocery store across the street. As it turned out buyers were a bit turned off, and it took a few weeks longer to sell the home. The house still ended up selling $100,000 over the original asking price, but after more twists and turns.
Listing a house to sell does require strategy, and the market continues to change keeping us all on our toes.
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Here is the same graph as above but for Condos: