A big hat tip to poster AZSaluki for sharing this story with us.
According to a recent report by CBS news, real estate is booming in San Francisco. [Video is not embedable, but I suggest checking it out here.] In the video, to show what a frenzy the market is in now, they showed one agent who said he had received 42 offers on one property.
The website Socketsite however, gives us just a little more insight into that 42 offer property:
The sale of CBS5’s infamous "42 offer" home at 555 Edinburgh closed escrow on 4/22/09 with a reported contract price of $570,000. That’s $111,000 (24%) over asking!
On a price per square foot basis ($456), however, that’s 0.2% over the 2009 neighborhood median to date ($455), 6.9% under the median last year ($490), 21.3% under the median in 2006 ($580), and about equal to the median in 2004 ($450).
Once again, the 42 offers were a result of pricing rather than a "real estate rebound."
A more realistic picture of the situation was offered by poster Mole Man on the Socketsite post:
We have no data about the other 41 offers. My guess is that there is a whole mix from low ball offers, investor offers, and probably a good number above $550,000 which is 95% of median value of the Excelsior. Serious buyers will look at comps and bid accordingly. The market is not supporting wild bids substantially higher than "market" values, but a reasonable house also will not usually be sold at a substantial discount in this market with lots of motivated buyers (lower price range SFR).
Underpricing will still bring in traffic, multiple offers, and ability to work with the most solid buyers with fewest contingencies and negotiation after contract. But sellers should not expect a bidding war to produce a price 10% above what the market statistics indicate a value should be.
Why can’t the MSM ever seem to find the Mole Mans of the world when it’s time to do an interview?
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Bottom line is median was and is 455 and frenzy brought in 456!. I would love to know the price distribution on those 42 offers. 1,250 Sq Ft was offered 376,000. I would bet that 90% came in below 400K. The price curve skew is not to the 456. Until the price skew is fat on the high side, the Realtor is fooling the buyers.
Same strategy is happening in Phoenix market. A bank comes in and offers 99,000 on a 165,000 home. They say make your best offer and will sell the home to the best offer. Ask any Realtor, the average number of offers are in the teens. Another tidbit, most are first time home buyers using FHA loans, (No “real saved” money down).
How many clients get frustrated since they say they offered what the bank wanted. FYI: The best sales on EBAY always start at .99cents.
yeah….i get a kick out of stuff like this. i’m sure if i put my house on the market for 50K i’d prolly get over 100 offers. i’d guess that the best would be around 160K. if i listed it at 160K i’d prolly get one (maybe 2) offers. either way it’d sell for the market value. the market has a funny way of finding the true price just fine on it’s own.
Just wait until the $8000 incentive ends and the unsustainable subsidized mortgage rates climb. We’ve got another few months of artificial housing frenzy. Then, unloaded shadow inventory and rising unemployment meet the consequences of closing the spout on unbridled government meddling.
And have we even learned anything from the last year? Every outlet is preaching recovery and no one sees what’s coming. Again.
AZSaluki – I’ll give you 60K right now and spare you the time sifting through the 50-handle offers
RE Sales Research for April is out and although superficially is strong, the back bone is very brittle.
8,550 closed, a record for 2009. (highest since 9-2005) This is what you will hear by the RE community.
Lets look at the numbers.
77% below 200K
75% Lender or Short sales
40% Cash vs 14% in 2005
FHA insured 28% vs <1% in 2005
Current Active listing 38,500 from 36,100 in March.
Source: Fletcher Wilcox, GCTA
Bell curve tells us where Price in the PHX market is: Lets look and compare to 8,550
28% Bellow 100K
What is the 28% mark on the High side.
2,394 from the high, what is the price?
Over 1MM 61 sold <1%
Over 500K 260 sold 3%
Over 300K 853 sold 10%
Over 200K 1930 sold 22%
you get the picture? The skew is fat on the low prices, until we get the fat skew going up with tails on either end, NO END IN SIGHT for price declines.
Price distribution analyis will give you first a bell curve than and only then will the bell curve start to resemble a Bra, two bulges showing the prices moving. The bigger bulge will show the trend of movement.
agnostic,
exactly…..and 60K is prolly where my home’s value is headed…lol.
stuffingmonkey,
you’re right…..except don’t be suprised if that credit gets renewed. i’ve suspected that they have the intentions of giving that for 2-3 years but they can’t let us know that and expect to have any impact this year (and a year from now it’ll prolly be a 10K credit, 0% loan, assistance with the down payment and a pony)
Coffee-
I always appreciate your numbers and analysis.
The only problem is that this kind of reasonable presentation of the data will never land you a job as a talking head. : )
Stuffing Monkey, AZSaluki-
Renewed? They’ll have to figure out something a little juicier to get more interest- and they probably will.
twist,
hence, the pony….lol.
: ) english not being my first language, reading again still is confusing. Let me try to simplify for the Doom board.
“About 68% of values drawn from a normal distribution are within one standard deviation σ > 0 away from the mean μ; about 95% of the values are within two standard deviations and about 99.7% lie within three standard deviations. This is known as the “68-95-99.7 rule” or the “empirical rule.”"
Using this rule for Phoenix, you will see many homes sell below 20,000 with the mean well below 100K.
You failed to mention one fact: the buyer is a fool. The Bay Area economy is collapsing. I live there. Every time someone buys a house out here we say, “Congratulations–you just bought a declining asset.”
Also, what does this tell you about the “booming” real estate market: although the banks’ unofficial moratorium on housing foreclosures supposedly ended two weeks ago, Washington has unofficially told them only to foreclose on VACANT houses.
PHOENIX – Good news for homebuyers.
by Associated Press (May 18th, 2009 @ 2:19pm)
A new Arizona State University study shows home prices in the Phoenix area have dropped by a record 37 percent since February 2008, and they’re expected to drop even further.
*the good news is they are droping at a slower rate!
http://ktar.com/?nid=6&sid=1162251
Coffee-
It always cracks me up when they start celebrating the “slower rate” in the spring. [They did that last year with the Case-Shiller numbers.]
In the boom years the rate of home price increases accelerated during the spring and summer, as that is when the market is busiest. Price increases would slow in the winter.
As I’ve watched the market fizzle, I’ve noted that the price decreases slow this time of year.
It’s always a mistake to get worked up about month-to-month changes in RE. They don’t really tell you much. You are much better off tracking YOY.