They’re not exactly doorbuster deals, but Bay Area home sellers are cutting their asking prices at the highest rate in years.
October is typically a big month for price reductions, as sellers try to close deals before the market slows way down between Thanksgiving and early February. But the number and percentage of homes with a price cut surged last month to their highest level for the month of October since at least 2012 in the Bay Area and 2011 statewide.
The jump in price cuts, which hit every Bay Area county, is another sign that after years of stratospheric increases, prices are leveling off and buyers are gaining a little more power in what had been a strong seller’s market.
Price cuts are a leading indicator because they are reflected immediately, said Patrick Carlisle, chief market analyst with the Compass real estate brokerage.
Although Bay Area home prices are still going up on a yearly basis, home sales, median prices and days on the market are considered lagging indicators because it can take a month or longer for deals to close.
In San Francisco, the number of homes with a price cut in October nearly doubled, to 238 from 124 last October, according to data from Realtor.com.
That’s nothing compared to Santa Clara County, where the number of price cuts rose to 818 last month, more than six times last year’s number. Santa Clara County had been one of the nation’s hottest markets this year, and the Bay Area’s price appreciation leader until September.
“Clearly, there is a market shift,” said Rich Bennett, a Zephyr agent in San Francisco.
He just cut the price on an 1,832-square-foot Victorian condo in popular Hayes Valley by $100,000. He listed the Page Street home in mid-October at just under $1.7 million, which was realistic considering it has three bedrooms, parking and a laundry porch and is “absolutely adorable,” he said.
But the buyers didn’t come.
“In October, we saw more inventory come on the market. The economics of the Bay Area haven’t really changed,” Bennett said. But “if you don’t have people beating down your door after two to three weeks,” it’s time to consider a price change.
He has another listing right around the corner, a one-bedroom single-family home on Lily Street, that he listed two weeks ago at $1.125 million. Within a week, it had a “preemptive” offer and the sale is now pending. Single-family homes are still a hot commodity in San Francisco.
Another condo just down Page Street from his listing also had a $100,000 price cut. It sold in February for about $1.4 million and went on the market again at $1.395 million in early October. Now it’s listed at $1.295 million, below its last sales price. “That is a good indication of how the market has shifted,” Bennett said.
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Even Palo Alto, famous for its multimillion-dollar teardowns, is seeing price reductions.
Re/Max Realtor Karen Fink said she listed a house near Stanford University on a 1½-acre lot with “a ton of deferred maintenance” for $4.1 million in mid-August.
Since then, the average rate on a 30-year fixed rate mortgage has risen from 3.5 percent to almost 4 percent. The cost of building materials, which the home would need, has also gone up.
After reducing the price to $3.5 million, the Palo Alto property closed Oct. 30 for $3.18 million, nearly a million less than the original price.
In San Mateo, Dennis Pantano of Pantano Properties just sold a house on Texas Way for $1.6 million after four price cuts. He listed the 1,990-square-foot house for about $1.75 million in mid-June. But within 10 days, the number of listings in San Mateo around that price jumped to nine from two. Had he listed it in May, it would have had lots of offers, he said. “It’s an illustration that not every house sells at full price or over.”
Buyers, meanwhile, sometimes have to be convinced that a price reduction doesn’t mean there’s something wrong with the house, said Paul Kitchen, a Compass agent in San Francisco. “There are a couple places that came on the market that were seemingly reasonably priced,” he said. But buyers “expect to pay 10 to 15 percent over asking. We say ‘Let’s put in an offer at asking.’ We have to convince them there is nothing wrong with the property.”
Kitchen has a client who offered the asking price on a home that had a price reduction and it was accepted, even though there were contingencies. “The buyer was somewhat surprised that they had time to do the diligence we had encouraged,” he said.
Oddly, Carlisle said, he is seeing price increases on homes that haven’t sold.
Until recently, “egregious underpricing was a very common strategy” in San Francisco and other parts of the Bay Area, he said. Agents “would price 10 to 20 percent below” what the seller would accept, hoping to get 5, 10 or 20 offers and drive the price way beyond reason.
Now, when a home doesn’t sell within a few weeks, the agent may increase the price so as not to put sellers in the uncomfortable (but not illegal) position of having to reject a full-price offer that was lower than what they would accept.
Editor’s note: This story has been updated online to include a corrected version of the chart.
Kathleen Pender is a San Francisco Chronicle columnist. Email: kpender@sfchronicle.com Twitter: @kathpender
Article source: https://www.sfchronicle.com/business/networth/article/Well-this-is-new-Price-cuts-on-Bay-Area-homes-13400672.php
