Contra Costa Real Estate

:: Market Conditions ::

Posted on Thu, Mar. 04, 2004

Area home sales blooming

LOW RATES, LOW SUPPLY DRIVE RETURN TO SELLER'S MARKET

By Sue McAllister

Mercury News

The home-buying bidding wars are back.

One prospective buyer had 10 competitors for a condo in San Jose's Willow Glen neighborhood priced at $489,000. He offered $530,000 but didn't get the home.

Another house-hunter made one of nine offers for an Almaden Valley house listed at $879,000. He bid $930,000, but the seller took another offer for the San Jose home.

The buyers' market of yesteryear is gone, replaced for now by one that favors sellers -- at least those who've priced their homes reasonably.

``Eighty percent of what's selling sells with multiple offers,'' said Nina Yamaguchi, who manages the Coldwell Banker office in Cupertino, where agents swapped stories last week about their buyer and seller clients. (No one disclosed final prices, because the deals were still in progress.)

Real estate agents say there is competition across most price ranges, from entry-level townhouses in San Jose to Los Altos homes priced up to $2 million. Most in the industry note, though, that the bidding isn't quite as frenzied as it has been in the past.

Low mortgage interest rates -- less than 6 percent for the average 30-year fixed-rate loan -- are part of what's driving demand. Buyers' increasing confidence in the economy is another reason, agents say.

Low supply, too, is a factor. By one measure -- the length of time it would take to sell all the county's homes for sale -- the market is as tight as it's been since the height of the valley's real estate boom in 1999 and 2000.

From San Jose to San Francisco to Berkeley to Fremont, the story is much the same.

Myrel Glick, an agent with B.J. Droubi & Company in San Francisco, recently listed a home that drew 20 offers, not an uncommon number, she said.

``I think people are feeling interest rates are going to change and they need to get into something now,'' Glick said.

In Santa Clara County, tales of four, five or 10 offers are more the norm. But one fixer-upper in Cupertino priced under $600,000 -- relatively low for a house in that area -- recently got 67 offers and is in escrow for more than the asking price.

Sandeep Bharati has been looking for a home in Sunnyvale, Cupertino or Mountain View for about six months, since he and his wife relocated from Portland. They have largely recovered from the sticker shock of the valley's high home prices, but not from some of the other realities of this competitive market.

He and his wife made offers on two homes in December, and both times faced competition from six or seven others.

``Both of those times we were outbid by other buyers, and it was very frustrating,'' he said.

To prevail in such situations, some buyers are forgoing independent home inspections before buying. But Bharati said he won't do that.

``It's important when you are spending upwards of $600,000 or $700,000 that you be comfortable with what you are getting,'' he said.

How long the multiple-offer phenomenon will last is anyone's guess. Interest rates are predicted to rise sometime this year -- maybe this summer, maybe after the presidential election -- and that could quell the buying frenzy. A sizable increase in the number of homes on the market could do it, too.

Typically the number of homes for sale rises by March. But in Santa Clara County, homes have been selling quickly once they hit the market; inventory has been almost flat since January.

Tina Bean of Alain Pinel Realtors listed a four-bedroom West San Jose house in the coveted Cupertino Union School District for $699,000 on Feb. 24. She held an open house last Saturday and Sunday, got five offers and had a contract to sell it by Tuesday.

``We could have sold it sooner,'' Bean said, if they had not held the open house.

Broker Richard Calhoun of Creekside Realty in San Jose, who tracks local real estate statistics daily, said it would take only about 30 days at the current pace to sell all the single-family houses on the market in the county this week. That's less time than during any period since the height of the valley's real estate boom, from November 1999 to April 2000.

There are just over 2,100 houses and condominiums for sale this week, less than half what was available at this time last year.

During a monthlong period ending Feb. 22, Calhoun said, sellers on average received 99 percent of their asking price. He said that number has probably increased in the past few weeks.

Obviously, not all homes sell with more than one offer. Chances for multiple offers increase if a home is in a desirable school district and is priced appropriately for the neighborhood -- or even under-priced.

Even a home with problems can attract buyers, said Jim Nappo of Alain Pinel Realtors in Los Altos.

He said he thinks many buyers have decided prices in the area have already fallen as much as they are likely to.

``I think some people are rushing in now thinking, `Gosh, I waited too long.' ''

Today's market is not quite a repeat of the nutty bidding wars of four years ago, when brand-new millionaires were offering hundreds of thousands of extra dollars for homes that were already priced in the millions.

But some things are similar: When they know they face competition, many buyers are offering sellers more than their asking prices. Also, many are agreeing to buy properties ``as-is'' -- without requiring any repairs before the sale.

What's different is that buyers aren't sweetening their offers with extras like stock options and paid vacations, the way some were in 2000. And agents say they have not heard about any ``sharp offers'' -- those in which a determined buyer promises in his offer to pay, for example, $10,000 more than any other bidder.

Also, said Dave Walsh of Windermere Silicon Valley Properties, ``The sellers are not playing the game they played in 2000,'' when they left homes on the market longer than necessary to get more offers and drive up the price.

Nowadays, he said, sellers should ``take the best, strongest offer that comes in and sell it fast, and be fair. Because who knows how long this market is going to last.''