Project Home: 'Perfect Storm' Sparks Bidding Wars As Bay Area Housing Market Heats Up 1 Year Into Pandemic
KENSINGTON (KPIX 5) – In the Bay Area's housing market, bidding wars are back with a vengeance. Despite a global pandemic, 2020 is expected to outpace 2019 when it comes to the number of homes sold.
"I'm very surprised by the numbers we're seeing," Michael Delehanty, a Real Estate Agent for Compass said.
Delehanty has been a realtor for 16 years, he says he's having daily conversations with clients about overbidding.
They go something like this. "I've got good news and bad news, the good news is I think I know what it's going to take to get this property. The bad news? The number is so outlandish that it's hard to even say out loud," he explained.
Delehanty recently sold a three-bedroom home in Kensington, a neighborhood in the Berkeley Hills, for $400,000 over the asking price, that overbid is more money than the house sold for back in 2001.
"We're talking about Kensington and these areas. But to be honest it's going on in Concord, it's going on in Oakley and Brentwood and the entire East Bay," Delehanty said.
A multitude of factors helped create this red-hot real estate market, first being all time record low interest rates bottoming out at 2.65% for a 30-year fixed rate mortgage in January. On top of that, more than 3 million millennials just hit home buying age.
The pandemic and work from home changed what people wanted, most want space now, but many sellers are worried about moving during a pandemic, this restricted supply giving us, bidding wars.
Zillow's analysts like to say, "low inventory + high demand = intense competition".
Homes in 2020 spent an average of 16 days on the market, it was just 12 in October, compared to sitting an average 42 days in 2019.
"It's this scramble for space where there's not enough inventory particularly in suburbs and single-family homes," Jeff Tucker a Senior Economist at Zillow said.
Tucker points out that the record-low interest rates we're experiencing mean even more in extremely expensive real estate markets, "because they know they can lock that in for 30 years which makes such a big difference on such a sizable mortgage."
Many people with white-collar jobs who didn't lose work during the pandemic were able to save money by staying home. For first-time homebuyers that helped with a down payment and low interest rates made buying hard to resist. Now the expectation is that the economy will improve in the coming years and those interest rates will start to tick up slightly.
"I think that is actually triggering a further scramble because this might be the last chance to lock in a sub 3% interest rate and people are thinking 'I want to do that right now,'" Tucker said.
"It's really created the perfect storm for the housing market to erupt that's what we're seeing," Alexander Fromm Lurie, a Real Estate Advisor with Compass.
Lurie said he saw interest wane in San Francisco during COVID but it's coming back, especially for unique homes such as 2454 Bush street. It's two cottages combined by a glass ceiling and has a lot of rare outdoor space for the city.
"We expect an offer today, that's after just a few days on the market," Fromm Lurie said.
The realtor went on to say, "people want a sanctuary in the city, gardens on both sides, not cookie cutter. People want to feel like they're in a special space."
Luxury real estate in San Francisco is also breaking records, 150 Glenbrook Avenue broke a neighborhood record at $17.5 million in 2020.
"The folks who have good positions, profitable businesses, they are buying luxury homes and maybe second homes," Laura Adams, a former real estate agent who now works for Aceable, a real estate license training site.
Adams says she worries about how the other half is faring, those who kept their homes but lost their jobs and are seeing relief only because of forbearance.
"When we hit the end of mortgage forbearance which is expected at end of June, we may see a lot more foreclosures that could change the dynamic a bit," Adams said.
As for how long the bidding wars will last, Delehanty says it doesn't look like it will let up anytime in the next three to six months.
"The outlandish aspect is not feeling like this is a bubble, not feeling like this is an unsustainable run-up on the market," Delehanty said.
