Third Quarter 2017 Market Update
By Eric Castongia, Zephyr Real Estate
The real estate market got off to a slow start this year, but once it started, we didn’t see the summer slow down that has occurred for the last two years. Buyers were/are waiting semi-patiently for homes to come onto the market, but remain in the driver’s seat, deciding what properties are worth and leaving the ones that are challenging and/or poorly priced; there are three in the neighborhood in the last quarter that buyers left on the market.
For West Portal/Inner Parkside:
- At the end of the third quarter, there were three active, nine pending, three withdrawn (failed to sell) listings and 11 sold properties; all 11 received multiple offers and 10 sold over asking. The amount of overbids ranged from as little as $180,000 to as much as $382,000. Contrast this with third quarter 2016 with a similar number of sales, but overbids ranging from $50,000 to $300,000. Offers have become more aggressive and prices have gone up, despite lower list prices.
- In the second quarter of this year, comparatively, there were more sales (19-not unusual for that time of year) and some higher overbids. The amount of over bids ranged from as little as $101,000 to as much as $630,000.
- There was only one sale reported as all cash (no loan); there were five in the previous quarter.
- There were a few ‘apples’; properties that have sold and resold in a short period of time. One example is a property selling for $1.049m in 2014, with a subsequent interior remodel, selling recently for $1.710m. Figuring the sellers could have put $250k into the remodel, the return on that one was still good for a 4 year hold.
- As part of my tracking, for kicks and a little history, I note when properties last sold. A few interesting ones from the 1970’s popped up. One selling in 1973 for $42,500 is currently listed for $1.659m and another selling in 1974 for $77,500 is listed for $2.195m. The lower priced one went up 39 times its original value; by my calculation 3900% appreciation.
- Figuring out the appreciation rate has been more of an educated guess than a science. Year to year, the numbers showing up in comparing various homes range from 11 to 30 percent appreciation. Realizing that’s a big spread, the ‘X’ factor takes into consideration what is in the market place from quarter to quarter, their location and condition. A case in point, a grand West Portal home a block from the Avenue sold a year ago for $2.33m. In the current quarter, an Inner Parkside house of 1960’s vintage and similar size sold for $2.425m. Year over year, that appreciation rate is about 4%. West Portal homes sell for more than Inner Parkside homes, as do older vintages, over more modern ones. I think the real appreciation rate is more like 20-25% year to year, which is hard to show, since there isn’t anything matching last year’s home. For those of us who have been around for a while, it wasn’t that long ago that sales prices going over $2m was astounding.
- Making an educated guess, an 10-15% year to year appreciation for most homes is more realistic, and those with ‘Dwell Magazine’ level remodels seeing more aggressive pricing (that 25-30% number); as most people don’t want to deal with remodeling and will pay a premium.
- What will happen next? Hard to say. With the Bay Area employment market and a restricted inventory, I think we are in good shape for the short term to keep our upward pressure on the market.
Eric Castongia, Broker Associate at Zephyr Real Estate (BRE Lic. No. 01188380) provided this information. The content of this article is an interpretation of data from the San Francisco Multiple Listing Service, the County Tax Record, the internet and Eric’s observations in the marketplace. Eric can be reached by e-mail at Eric@SFHotBuy.com, or via mobile phone at (415)307-1700.