Interest Rates Should Be Up, Will Inventory Follow? Not quite yet...
While we wait for more homes to come onto the market, here are some highlights in this edition of ITK:
- Why inventory is likely to remain low — it has something to do with football.
- The Fed is meeting this week on Tuesday and Wednesday, most expect to see interest rates by an eighth or quarter point; let’s hope it’s just an eighth. See how rate changes impact buying power below.
- Once again, Kevin+Jonathan achiever Vanguard Properties’ Top 21, Top Producer Designation capping our best year to date.
- The Raffi 2022 Calendar is here. If you didn’t get a copy, let us know.
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Why What Happens in Green Bay, LA or Tampa Bay Impacts Housing Here in the Bay
Like train- or plane-spotting you’ll become accustomed to a regular cycle of activity at any given time. When it comes to San Francisco’s housing inventory, our market focuses on two or three large peaks of listings a year with every week’s new inventory levels focused on a noon deadline each Friday, which is when agents have to enter their listings by to make it onto weekend open house schedules.
In our latest San Francisco Chronicle Real Estate Section column, we explain why:
It’s always a bit of a wild card as to when the Bay Area’s spring selling season starts. Do seller agents hold their property listings off until MLK Day has passed? Does launching a listing right after New Year’s make sense? Maybe after the Super Bowl? The 49ers’ success in this year’s playoffs, combined with the Omicron surge, may end up setting a more a uniform market kickoff to this year’s selling season — depending on how well Mr. Shanahan and company do.
Why? It’s a matter of numbers. Most properties will have offer dates after having two Sundays of open houses here. And because lots of would-be homeowners also happen to be 49ers’ fans, any time the 49ers get to the playoffs (and the Super Bowl), open house traffic will fall precipitously. How can that 3-bed bungalow compete with a post-season play-action fake? Instead of grabbing property statements, many buyers will be reaching for a buffalo wing (or its soy-based kin).
Agents dislike having to add more days on the market (this stat can take on a life of its own) and rather than have a property sit on the market an extra week to capture these now-distracted buyers, many sellers may opt for Saturday open houses, but given some playoff games are on Saturdays too, most more are likely to punt a property’s market debut out until the final game is played. Hopefully, it gets pushed out until mid-February — the weekend after the Super Bowl. Go Niners.
Rates About to Go Up (Probably?)
It was only a matter of time that record-low mortgage interest rates were going to rise. It looks like that inflation numbers and the continuing economic recovery have gotten to a point where the Fed’s Open Market Committee will have little choice but to raise the rates upon which lenders price their products at their first regular meeting of the year on Tuesday and Wednesday. Interest rates have already been inching up since the Fed started to taper down its securities buy-back program.
What does this mean for the average borrowers?
There may be increased urgency to buy now rather than later (too bad inventory is still low, see above); why pay the same amount of money each month for less borrowing power?
As a general example, consider that if you took out a $1.5M mortgage at 3.5% your monthly PITI payment would be about $5,059. At a 4-percent interest rate the same mortgage will cost just over $5,700 and at 4.5% the monthly payment would rise to just under $6,100.
But this may also mean a fresh look at other mortgage products out there like the 3-, 5-, 7-, and 10-year adjustable rate mortgages — the ARMs. After all, a 30-year rate lock, while considered the gold standard of home buying, is really just price insurance for a mortgage that you’re unlikely to keep for its entire term. So unless you’re truly buying your forever home, think about these lower-rate ARMs as you’re more likely to sell or upgrade your home within 10 years. And even if the home you have is one you live in for a very long time, remember that Bay Area homes appreciate at a much higher rate than most other places without a having to do very much more than upkeep meaning you’ll have more equity to do a refinancing with in the future.
And very last point on this (pun intended), thanks to higher FHA-based conforming loan limits for high-value markets like San Francisco, and price weakness for certain property types (e.g., certain types of condominiums or multi-unit properties for example), conforming loan products may actually be on the table for folks as they’ve risen to just over $970,000 for houses and condos, $1.24M for 2-units, up to $1.867M for 4-unit buildings.
Read more about how financing works and what options there are here.
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In Case You Missed It...
See where we ended up in 2021 as we wait to see how sales do as 2022 gets moving.
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The San Francisco treat (or past time) — real estate.
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Take a look at where prices ended up in 2021. Prices for single-family houses were up all around the City. The story for condos was mixed of course. Ask us for more details and what the forecast looks like for 2022, but our general pattern follows what you'll see below...
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And as we prepare for 2022, take a deeper look at what happened this year and how it compares to years past.
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FOR CONDOS, TICs and CO-OPS
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OUR PROPERTY VIDEOS + WALKTHROUGH VIDEOS
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As you may know, we have made hundreds and hundreds of YouTube property walk-throughs of the things we see in San Francisco. Here's our most recent walk-through of a great one in Glen Park with an offer date set for this week.
Care to walk and talk?
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In Glen Park
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While inventory has been light, sales activity has slowly picked up meaning there are lots of stories to share about how things sold over the past few weeks. Here are some highlights that have come to our attention over the past couple of weeks. Remember, as usual, all of the tall tales you see below is hearsay (maybe even double or triple hearsay) so the real facts and final outcome will likely to be different. Ask us for details.
The Home Without A Driveway That Has a Garage Anyway. The stunning home at 17 Temple Street off of 17th Street in Corona Heights once belonged to a client of ours, was a fixer-upper that was turned into a modern showcase home. Only issue is that the sidewalk and the elevation of the finished home created a nearly insurmountable hump that effectively accessing the garage impossible for most cars. While the home didn’t sell last year, offers came in over its long marketing period. With 4 beds, 3.5 baths and just over 3,300 sqft the home’s location, design and overall feel are nevertheless compelling. Listed at $3.995M the home is finally in contract at list.
Over at Frederick Street. Formerly a bike shop at Stanyan, now a new development with 4 units and a commercial space. The penthouse of the new development at 494 Frederick has its own roof deck, luxury finishes in the light wood, white and grey palette, 4 bedrooms, 3.5 baths and more than 2,600 sqft and 1-car parking. Listed as a ‘coming soon’ listing in December at $3.795M, its two levels and two private terraces and private elevator access proved too much to pass up and the property is in contract at its list price. Two other units, 490 and 492, are available with 490 having an offer date of this week and 492 being listed at $2.8M.
Change in Duboce. The legal 2-unit Victorian building at 40-42 Sanchez at Duboce near Duboce Park, was listed at $2.798M. A third, unwarranted, attic unit and space to develop an ADU on the garage level means the property has a potential of 4,000 sqft of living space while still having original charm and details to work with. After multiple offers were received, a set of buyers who intend on living at the property and having family members onsite as well, won with an all-cash offer at $2.7M.
On the market and into contract at 942 Noe. The dark-façade, Queen Anne Victorian at 942 Noe is a house we always notice when driving by for its sharp-looking façade. Its owners started a renovation/expansion project a good while ago and decided to sell after interior demolition was completed last summer. After being a ‘coming soon’ listing for a few months, the listing went live and out to the market at large in late December and is now in contract. No word on how the approved-plan home fared, but it was listed at $2.495M, so we’d imagine it is in contract near that price. We also imagine that the buyers here are likely to be cash or would otherwise be getting a private, hard-money loan given that demolition has been completed as most conventional lenders won’t lend on a purchase at that point.
An off-market sale at 3663 17th Street. Folks scooped up a listing on the Vanguard coming-soon for a massive, 3,100-sqft, 4-bed, 2-bath, 2-level, top unit of a Victorian building at Guerrero for just under $3M. Despite the fact that getting to the ground floor outdoor space was a bit of a trek and that there was tandem parking, the sheer amount of space and location made it just right for one set of buyers who are still getting a centrally located, top-floor condo for under $1,000/sqft.
From one to nine (one day). A dilapidated warehouse set on a double-wide parcel at 1354 York Street in the Mission at Cesar Chavez, with more than 10,000 sqft currently, went into contract near its $1.85M list price. The parcel’s zoning allows for at least 9 units, which is what the buyers are planning to do.
Part of the court-monitored receivership that is selling the assets of a notorious landlord obliged to divest in their properties, the multi-unit building at 1012 Page Street is in contract near its list price of $1.495M. Considering the building is home to multiple sets of long-term tenants, the purchase, which has a court confirmation minimum overbid amount of $1.55M, is a long-term hold for the current winning buyers.
High Up. High Dues. Longer Sale. A 3-bed, 2-bath Diamond Heights top-floor condominium at 5102 Diamond Heights, Unit B, first came on the market with a list price of $1.248M right after Halloween last year. While the views from the top-floor home are sweeping, the monthly dues are pretty steep at more than $1,200 (including earthquake insurance, which is kind of odd given that this area is on solid bedrock). Despite having been on the market for a longer time, activity picked up right before Christmas with two offers coming in for the 1,200+ sqft unit with the winning one ended up at just under the list price.
A tenant-occupied fixer house at 2858 22nd Street at Alabama in the Mission with 2 beds and 1 bathroom, garage and about 1,535 sqft currently is set to be delivered vacant in April. We don’t know much more than it will be sold, off-market, at $1.335M.
How Can You Say No to Monks? Monks with cash. The decent corner house at 3233 Ulloa Street near 33rd Avenue in the Parkside, a 2-bed, 1.5-bath sunset-style home was being prepared for market when a neighbor saw it and moved to make it theirs early. Indeed turns out the neighbors are connected to a group of monks who bought a nearby parcel as their place of worship who also needed a rectory to live in. With an intended list price of $1.7M the home is in contract at $1.9M, all-cash.
Quickly in Bernal. The 2-bed, 1-bath, 1,100-sqft house at 319 Prentiss where Cortland starts to slope down towards Bayshore and Lowes, was listed at $899,000. By the time of the first open house there were a pair of preemptive offers both above $1.2M with the winning one being all-cash and non-contingent with 15-day close.
Today’s Bonus Real Estate Lesson: Why List Price and Timing Matter — Oh, throw-in Court-Confirmation Too. Another house in the Parkside, 2375 33rd Avenue at Santiago/Taraval, with 2 beds, 2+ baths with 2 permitted rooms on the ground floor and 1,700 sqft, was listed at $1.47M when it first hit the market in August. The tunnel-entry home required a court-confirmation process whereby a buyer can ‘win’ a property in the first instance but then someone else can go to the probate court hearing where the sale is finalized and place an overbid amount. Take a look at our commentary on how this works here.
Anyway, the property drew attention but no offers. Then, after seeing what other similar properties were listed for (around $1.2M), the agents reduced the list price to $1.198M. Of course, an offer near the original list price just over $1.4M came in and the court confirmation process started with a hearing date being set. At the hearing there were seven rounds of bidding tantamount to an auction and, in the end, the original folks who submitted the $1.4M offer were beat out by another set of buyers who ended up ‘officially’ winning the property at just over $1.6M.
Some real estate agents focus on specific market segments and areas while others like us can (and do) sell property anywhere in the state. Two of our colleagues who focus on probate and estate sales had a pretty busy holiday as you’ll see below creating feeding frenzies at the same time.
Feeding Frenzy, pt 1. 1814 Barton is a tear-down house in Redwood City right at the Atherton border in the Woodside area that is so badly dilapidated on the inside that no one was allowed to go in to see it before offers were due — there was doubt that the front porch was even safe to walk on and portions of the roof are actually just tarps. Listed at $1.44M but not requiring court-confirmation (where a dark-horse buyer could swoop in) the real value here, apart from the plum location, is that the house sits on a large, 8,600+ sqft parcel. Indeed, after 88 disclosure packages were out, there 19 offers in with the winning one landing at $2.3M. It’s unclear if the future investor-group owners will choose to tear down and build a new, massive home or proceed to divvy up the parcel to build multiple homes.
Feeding Frenzy, pt. 2. A Fixer in Santa Clara at 970 White Drive with 3 beds, 2 baths sloping floors and 1,400 sqft of interior area set on a nearly 5,700-sqft parcel, was listed at a mere $998,000. The probate sale didn’t require court confirmation and drew lots of attention with some 376 disclosure packages being sent out and 39 offers coming in on the offer date with the winning one landing at $1.6M.
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