First Quarter, 2010
The recovery continues - the First Quarter of 2010 was strong in all San Francisco residential property price ranges, and that momentum is even more evident in April. All economic indicators of our local real estate market continue to improve. We now have very modestly rising home prices, fewer days on market, many multiple offers, and improved inventory accompanied by strong demand.
What this means to Sellers is that the strategy for pricing your property has changed compared to 2009. Residential properties should now be priced at or slightly below the perceived market clearing price based on comparable sales. The market will carry a property up to the price where it belongs-not radically higher in most instances, but up to the market-clearing price. It has been over five quarters since that was the case.
Today, if a property is priced too high, most consumers and agents will simply ignore the property and move onto the new inventory-versus 2009 when they would have made a very low offer after enough time on market. In 2009, almost no Buyers offered full price. This spring, full price is the lowest one can offer preemptively. This phenomenon will not kick in if the property is not priced well initially.
What is the "perceived market-clearing price"? One can crunch the numbers ad nauseum, but without excellent sub-district (e.g., Marina, Cow Hollow, Russian Hill, Sea Cliff, etc.) knowledge, establishing the right price is exceptionally difficult. Pricing is part art, part science. Those who rely on price per square foot as their primary tool are missing out entirely. Condition, location, outdoor space, parking, views, architectural style, quality of finishes, and price elasticity/sensitivity of the target market-these all often strongly outweigh price per square foot.
What today's market means to Buyers is that moving quickly is essential. Excellent properties are flying off the market, especially those with broad market appeal. Buyers need to be prepared to act, visit properties as soon as they come on the market (or even sooner if your agent is plugged into the Pocket Listings) and not delay. Countless properties receive offers on their first day on the market, and in the more well-managed cases, the listing agents then set the offer date for a few days hence to give others a chance to bid as well-all to the benefit of their Seller. This is much more like 2007, but with more modest pricing. We have only regained some of the 12-20% price decline post-financial meltdown.
What are Pocket Listings? We hear this question quite a bit. They are listings with a Broker that have not yet been placed on the MLS. Why? There are a variety of reasons: - The Seller does not wish to be publicly listed-this is more likely the case at the very high end. - The property is not 100% ready for market, yet agents and their select clients may get a preview. Perhaps photos and marketing copy are not yet ready. - The Broker and Seller are testing the market before going live on the MLS. - The Listing Agent is managing inventory in a multi-unit building so as not to flood the market. This occurs primarily South of Market.
Regardless of the reason, the top agents are plugged into the pocket listings. Most of us are part of the Top Agent Network, a by-invitation-only network that allows us to communicate directly with the other top 5% agents about our Pocket Listings, Coming Soon listings and specific Buyer needs. Also, the premier brokerages in San Francisco keep their own lists of Pockets-all designed to give the agents an edge for their clients.
Once again, the current rapidly moving market creates a time where market savvy and experience make all the difference in the world. Experience and knowledge can pay dividends to sellers and lack thereof can put buyers out in the cold. Having the personal advice and dedication of a well-informed Realtor® will make all the difference.
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