How to find home buying deals in the Bay Area housing market

If you were following the Bay Area real estate market for a while, you developed a way to read “home for sale” listings.  At the peak of the market this spring, it was easy to dismiss most of them as “unaffordable” or just “not for me”.  Homes were selling the day they were listed and for prices no one would be able to anticipate.  Competition was fierce!  Then inflation kicked in and Feds started pumping breaks to slow down the economy and now we are seeing the effects of their efforts on the real estate market.

Bay Area real estate market is softening.  At the time of this video about 1/3 of homes in Santa Clara County and roughly 20% of homes in San Mateo County had at least one price reduction.  What signs should you look for to recognize good buying opportunities that these new market conditions present.

1. Look at the time on market.  During the spring selling season median time on the market was as short as 7 days.  It means that half of the homes that came to the market were sold in 7 days or less.  For the whole last year, the median time on market was only 8 days, the fastest pace of sales ever.  At the time of this video, median time to sell grew to 18 days.  Why median time on the market is important?  In any market, sellers begin to wonder why their home is not selling when other homes are selling before theirs.  That is the time when they start to wonder if their home will sell and at what price.  That is the time when sellers will start considering price reductions and may become ready to accept an offer that is below their initial expectations.
2. Review the price change history.  When the home is on the market for 20, 30 or more days, no price changes, it is an indicator of the owner’s refusal to recognize the changing market conditions.  This seller is willing to wait for that one unique buyer who will pay full price for their home.  Another seller may decide to make a huge price drop, they are telling the world that they are motivated to make a deal – bring your best offer!  A third option is when seller is chasing the market down by making small price adjustments.  Catching an owner like that at the right moment and submitting a clean, easy to accept offer may allow you to snatch this home without any competition.
3. Evaluate the competition.  When searching for homes, always note similar properties in similar neighborhoods, not just the same floor plan or architectural style.  Note homes with the similar lot sizes, similar square footage, same school districts, access to commute routes, etc.  Even when you don’t like these homes, they are in competition with the home you want to buy.  When you have more homes on the market, like now, there is more competition and competition removes buyer’s sense of urgency.  It gives you more time to consider different properties, compare them and do additional investigation prior to committing to writing an offer.

Training your eye to recognize the right combination of time on market, price change history and competition from other homes for sale will help you find the best home your money can buy!

One question I am getting very often these days: “Is it still a good time to buyer a home?  What if the home values will continue to decline?”  Yes, it is still a good time to buy a home but only if it is the right time for you and your family.  To figure it out you need to answer these three questions.  I wanted to say three simple questions but answering them may not be so simple.

1. Is it the right time for me to buy a home from the lifestyle point of view?  Do you need to move closer to your job to cut down your commute, get a bigger home, start a family, send you kids to a different school, or finally move out of your parents’ house.  Whatever it is, moving into your new home should get you to the next stage of your life.
2. Can I afford this home?  Review your finances to make sure you are in a stable situation and can pay for this new home now and for years to come while maintaining your desired lifestyle.  Be conservative in your estimate and do not overstretch!
3. Will I be able to stay in this home for at least 7 years?  Owning the house for a long time will protect you from any potential market fluctuations.  I am saying 7 years, because I can’t think of any 7-year time period in the history of the Bay Area real estate when home values declined, including the Great Recession.  Afterall, for many people their home is their largest investments.

Bottom line, if you answer all 3 questions positively, if it is the right time for you, if you can afford it and if you are planning to own this home for a long time, you should not hesitate to buy a home.  Don’t get deterred by the uncertainties of the current market or economic conditions.