What don't I understand about the Bay Area real estate market?
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Anonymous
| DH and I met in law school in the Bay Area 25 years ago and our DD will be going to get a PhD. We've been fantasizing about relocating from Washington DC to stalk the child. Looking online, it seems that we could trade our $1.5-2M house in DC for a Berkeley Hills house with a view or a small renovated rowhouse in a sunny part of SF. We don't care about schools, don't need to commute (except to the airport) and we want to downsize. The listings we find seem much nicer than our current house. In Manhattan, we'd be looking at 1BR apartments. It seems too good to be true, especially in light of the stories about how insane Bay Area housing is. What are we missing? Are the list prices unrealistically low and every house sells $1M above asking? Do sellers expect cash buyers who can close instantly? What's the catch? |
Anonymous
It’s probably that you don’t care about schools there but did here. |
Anonymous
Not OP here. I really doubt this is the reason. DCUM folks tend to overestimate the impact of good schools on housing prices, especially in cities. Probably because you assume that because your world revolves around kids, everybody's does. |
Anonymous
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My in-law's small ranch house in the Silicon Valley is worth more than $2M. They tell me when the neighbor's sell, the house gets multiple offers above asking price, there is a bidding war, the inspection is waved and the house sells for a pretty penny above asking.
Houses are so expensive in places like the South Bay because, like DC, there are height restrictions on housing. Usually no more than two stories. High demand, low supply. Be aware, too, that your tax rates are set to the year you purchase a place. My in-laws bought their house in the early 1960s and pay a 1962 tax rate on the place. Like everyone else in that boat, they will never move. |
Anonymous
WUT? |
Anonymous
| ^^Forgot to add that many of the buyers are from places like India and China, and they pay in cash.^^ |
Anonymous
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Location. Not all of SF is "desirable", and I don't mean just about the schools, though that is a factor.
Where in SF are you looking? We lived in the Bay Area several years ago, looking to buy a house. I saw a listing that was really great and the price was below the other crap homes we looked at. So we did a drive by the house. I realized why it was so cheap. It was near Hunter's Point in Bayview. |
Anonymous
I assume OP is poking fun at herself or being sarcastic. |
Anonymous
| In San Francisco, schools are not assigned by where you live. It’s a factor but not an overriding one. Your dreaming if you think your getting a house in a decent sunny SF neighborhood that does not need a full gut remodel for $1.5 million even in less than desirable areas. That house in the Berkeley Hills is likely up one of those crazy streets with a steep hill and many twists and turns. If it were me and I was downsizing, I’d get a 2 br condo in a walkable great area of SF....that will run you about $2 million. |
Anonymous
I meant to add bidding is alive and well and the actual price of real estate in the Bay Area is way higher than the listing prices. |
Anonymous
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Low list prices
Cash bids Likely in awful condition--the housing stock in many areas is old and poorly kept, and possibly not up to code, which is a concern giving fires/earthquakes (oh yeah--you'll need fire and earthquake insurance there and it's not cheap) |
Anonymous
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We just went through this. Moved to the SF Bay Area from DC for DH's job. Our budget was a little less than yours, but not by much. It took us two years, with me as a SAHP and home shopping as basically a part-time job for us to find an affordable property that was not in serious disrepair.
With respect to the East Bay, particularly Berkeley. Stop looking at list price and start looking at comps for similar properties. You'll see that there's a huge difference between list and sale. East Bay properties tend to be listed at prices that are about a quarter-to-fifty percent below what they sell for. Many, many buyers find this practice infuriating, but it's rampant. This is how realtors are handling buyers' sticker shock and sellers' expectations. Sometimes you can find a listing that advertises as "transparent pricing," which means it's priced realistically and usually fairly, but these go quickly. Our realtor advised us to only look at listing that were up to half our budget. The other thing you need to know is that most of the housing stock on the market has been very, very poorly maintained. I'd say about 80% of the properties in our price range were estate sales, where the family had neither maintained nor updated in decades (if ever). The realtors slap a coat of paint on them and maybe put on a granite countertop so they look updated, but the bones are terrible and you'll likely need a repair budget in the hundreds of thousands of dollars to get the house to earthquake safety and modern standards. The East Bay is also under court order to clean up residential sewer leaks, so you'll need to be prepare to fork out $5-$15k for a new sewer lateral at the sale. (Many sellers insist on passing on these costs.) The cities won't approve the sale until the lateral is assessed and replaced, if failing, which they all are. Moreover, as we learned in a very, very expensive lesson, renovation and remodeling costs here are astronomical. (So high our insurer says they have to re-estimate almost weekly when writing policies.) This is partly due to demand for contractors coming from the North Bay, where they are still rebuilding after the devastating fires. For example, we were quoted $100k to rebuild 600 square feet of foundation on a single-story house on a flat parcel. $20k to replace knob-and-tube and a sub-panel in that same space. $10k to re-plumb, which would have had to be done before any further improvements, because the pipes were to small to handle the water pressure from modern appliances. We also had to deal with asbestos removal and lead paint, tho these may not be as big a deal for folks with grown kids. Interestingly, you'll likely find that SF list prices are fairly close to sale as are properties on the eastern side of the tunnel between the East Bay and Walnut Creek. Lafayette, Orinda, and Walnut Creek all have options in your price range and are a short BART ride to Berkeley. We lived in a rental in this area and loved it. I also really liked the Hiller Highlands in Oakland (great views and newer buildings with less deferred maintenance). You will want to consider your tolerance for wildfire risk in many of these areas tho. This is a very real problem in these communities. We ultimately ended up in a "foggy" part of SF. I would encourage you, even if you are intimidated by the weather, to look in these neighborhoods too. I have been shocked by how much sun we actually get here. Especially in the winter. Airport access here is fantastic. Much better than anywhere in the East Bay, even on BART. Lastly - sorry for long post - the best local real estate economist used to be with Paragon realty, which was bought by Compass. Many of those reports are free online. They should give you additional insight. |
Anonymous
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12:42, thanks, I appreciate the detailed response. Lots of complications to consider. Our friends in SoCal tell us that renovations are cheap there, so its eye opening to read about the difference in NorCal. Also, I assumed that folks have all earthquake proofed their homes and we wouldn't have to put in shear walls and foundation and roof anchors, etc. Weird that folks would want to live in a house w/o that. Fire and mudslides I guess should be on our danger concerns too. Preparing to pay all cash seems sensible and possible. And only looking at listings that are half our budget seems a really smart idea.
What neighborhoods to consider? When we lived there as 20 somethings, I always liked the East Bay hills from El Cerrito to Montclair and areas like Crocker Highlands and Trestle Glen in Oakland. Rockridge, Elmwood, and Claremont were favorites but I understand there's seldom anything to buy there ever. In the SF, I liked Noe Valley north to Japantown and Lower Pac Heights. I assume the Mission and Portero Hill have been thoroughly gentrified too, right? |
Anonymous
No they don't. They pay tax on a base of the 1976 value with a 2% per year inflation factor. Read up on Prop 13. |
Anonymous
https://www.berkeleyside.com/2019/09/09/insurance-companies-give-the-boot-to-berkeley-hills-homeowners-citing-fire-risk The hills used to be the fancy part of town but, in addition to the wildfire and landslide issues in the hills, people are now more interested in walkable neighborhoods, which are not in the hills. And yes, most houses go for well over asking and a lot of the houses in the hills will need some work (and you're going to be a lot of taxes on a $1.5-$2m house). |