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How will you spend your million dollars?

By Eric Castongia, Zephyr Real Estate

The West Portal and Inner Parkside Neighborhoods are very popular in the San Francisco Real Estate market; they are well-located, close to conveniences and affordable-by San Francisco standards, affordable meaning homes available for up to one million dollars.  The appreciation rate we have enjoyed is due in significant part to low interest rates, as buyers can afford to borrow more.  The second significant factor is supply and demand-when there are not enough homes to buy for the number of buyers in the marketplace.  With the combination of these two factors we have multiple buyers bidding for one property and overbidding-meaning offering a higher price than the home is listed for in order to win the bid; it is not unheard of to report a home sale that is 20-25 percent over the homes list price.

To the out of area observer, it sounds like we’re all nuts, but the truth is, there is some buyer psychology involved in the art of home pricing. Most buyers anticipate having to overbid, perhaps having lost in competition on one or several homes, so a home’s list price is many times, listed lower than it is expected to sell for in order to generate traffic and interest in the home.  Once buyers have viewed the property, the sale price is determined by the bids on the home.  So, for example, a home that might be expected to be worth $850,000, might get listed for $799,000 and sell for $900,000; the home may sell for more than its expected ‘worth’.

To approximate the rate of appreciation in our neighborhood in 2004 I did some research on the San Francisco Multiple Listing Service.  Comparing similar homes between the months of January and December of 2004, the appreciate rate was approximately seven percent.  Between December 2004 and March 2005 appreciation was up approximately five percent.  This appreciation rate seemed to be consistent plus or minus a few percent comparing other similar home types as well.

As interest rates continue to rise as they have been for the last several months and prices get even more out of reach for the average consumer, it seems likely that home prices will stop escalating at their current level.  We saw a slowing of the market occur in 2001 with sale prices getting closer to list prices and homes on the market for several weeks instead of several days.  Prices slowing will be a good thing, restoring sanity in the marketplace and allowing more San Franciscan’s to have a piece of the pie.

As the average home in West Portal and Inner Parkside approaches a million dollars, how will you spend your equity?  If you’re staying in your home, enjoy and maintain it; if you’re moving into the neighborhood, you’ll be joining a very stable neighborhood; and if you’re leaving, you should have a nice pot of equity to help you in your next financial step.

Eric Castongia, Residential Sales Specialist at Zephyr Real Estate provided the information in this article.  Eric can be reached by e-mail at Eric@EricSellSF.com, or via mobile phone at (415)307-1700.

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