Navigating the Bay Area’s Transitional Market
Bay Area buyers and sellers have become accustomed to the region’s boom market conditions: sky-high prices, scarce inventory, intense bidding wars, and routine over-ask sales prices. These factors have presented a formidable barrier for prospective buyers trying to get a foothold in the market.
Not surprisingly, this type of market doesn’t last forever. There is an inevitable cooling down or leveling off of these dynamics, and we are seeing signs that the Bay Area may be moving into a transitional market.
The real estate industry defines a transitional market as one in which the market is essentially neutral, favoring neither the buyer or the seller – basically a flat market. The Bay Area market is showing important movement in a number of different indicators:
• Inventory is finally up in Santa Clara (24%) and San Mateo Counties (11%)* compared to the same period last year
• The sale price compared to the list price for homes in all five counties tracked by MLSListings has stayed essentially flat and just slightly over asking price: Monterey (98%), San Benito (100%), Santa Clara (105%), Santa Cruz (100%) and San Mateo (0%). Median and average home prices for all five counties are still up over the same period last year.
Homes are taking a little longer to sell in this type of market. The days on market for single family homes have increased by 9% in San Mateo County over last July and 20% in Santa Clara County over last July. *MLSListings report for July 2018
• In San Mateo County, half of the homes sold in 11 days or less last year, but now sit on the market an extra day compared to last July.
• In Santa Clara County, where half the homes sold in 10 days or less, it now takes 12 days.
We are seeing changes in the market that can spell good news for buyers trying to finally get into the market. What do you need to know if you’re hoping to take advantage of this market condition?
• Fair market value. Sellers need to understand the fair market value of their home. This is determined by supply and demand. In a transitional market, the amount and pace of negotiation shifts so establishing the right price is a critical component. Sometimes a transitional market can see more offers contingent on the sale of an existing property.
• Terms. A transitional market could signal the end of cash offers, immediate closings with properties sold ‘as-is’, and bidding wars. A transitional market is just that: transitional. It can be transitioning from a seller’s market to a buyer’s market or the reverse. Because the market is in transition, it is key to understand the type of offer you are ready to put on the table.
• Professional guidance. For buyers and sellers who have only seen the frenzy of California’s real estate market, where available properties fly off the market as soon as they are listed and sales prices are the result of bidding wars, it is more important than ever to have the guidance and insights of a knowledgeable Realtor.