San Francisco Home Prices Overvalued By Two Percent and San Jose By Three Percent
For those who have read Malcolm Gladwell’s “The Tipping Point” in which he defines a tipping point as “the moment of critical mass, the threshold, the boiling point” it seems that for real estate prices here in the Bay Area the Tipping Point may be happening now.
We’ve seen a few economists (like one from Trulia) who state that prices are overvalued in the California cities such as San Jose (+3%), and San Francisco (+2%). The speculation rises much like the San Francisco home prices which remain the highest in the country. What causes this “irrational exuberance”? Is it investors and flippers or is the rise in prices due to solid job growth, start-up IPOs, high incomes, and limited local housing supply?
Multiple Offers Still Common But In Fewer Waves
Whatever the cause, Bay Area real estate may have hit a peak. In the past few months we’ve seen listing agents report that it has been commonplace to have offers escalated $100,000-plus over asking price. Consider that these offers have risen more than $50,000-$75,000 over fair market value or apprised value. However, those offers used to come in waves of 15-20 offers, now they come in at 6-8 offers.
Areas such as Fremont and across the bay in San Mateo have seen offer prices hold but the overall number of offers appears to be declining. What is the cause for this drop? We see more inventory, some buyers becoming frustrated and dropping out of the buying process, for other buyers the loan process remains taxing which causes them to bow out, and of course affordability. Make no mistake, in most Bay Area regions the pendulum still sits in the sellers’ corner but with each passing day it inches slightly back toward the middle of the scale.