2017 San Francisco Bay Area Home Buyers Beware
In some respects, experience in real estate sales can mean very little. The most experienced agents often have no clue about what will happen with the market. New agents? Same thing. The only difference is that experienced agents recognize that the market is impossible to predict with any accuracy, while the newer ones dare not admit it.
That said, and acknowledging that I cannot predict the future, I think this is a challenging time for buyers in the San Francisco Bay Area for reasons beyond affordability (for context, I specialize in representing buyers and sellers of luxury homes in Marin County, which is located just North of the San Francisco and the Golden Gate Bridge).
Over the past several months, and in particular since the election, I have sensed fear in buyers. And I think hesitation could cost them in 2017.
Here’s what I sense about 2017’s Bay Area home buyers after having held several open houses and working with several buyers so far this year:
- Buyers think the market is coming down off its cyclical high prices (maybe, maybe not — anecdotal evidence points both ways over the past six months in the San Francisco Bay Area and in my particular region of specialty, Marin County).
- Buyers have a general understanding that interest rates are likely to rise (it seems to me that rates are extremely likely to rise), but have not seen much impact yet (but they will).
- Buyers expect more homes will come to market this year than last.
This last point is the one that I think 2017 home buyers need to careful about. I am not convinced we are going to see increased inventory (note: the number of sales in 2016 were down 13% from 2015). And real estate is a supply and demand sport. In fact, I have not spoken with a single agent who expects a marked increased inventory of homes for sale this year.
There are a few primary reasons people are not selling: 1) they don’t know where they would go next (where do you go that is nicer than Marin?); 2) aging in place is becoming much more popular and doable; 3) people are living longer; 4) as prices have gone up, equity lines now provide people with funds to renovate or expand rather than having to move; and 5) selling your home can require a lot of work and fuss, which for some outweighs the benefits of selling.
Yet, for buyers, there is almost always competition from someone relocating or an investor needing a place to park their 1031 exchange funds (Marin County price appreciation over the past 70 years has been like clockwork).
And when there are few homes for sale, that means buyers face major competition. Again, real estate is a supply and demand sport, which is why I see risk for buyers that wait around for more inventory in 2017.
Buyers beware. My best advise is to buy now as San Francisco Bay Area inventory and/or affordability will not be improving in 2017.