“SF Hot Housing Prices Back, Bidding Wars Fiercer Than Ever”
True, it was off of Ocean Avenue in Ingleside Heights - not the Sunset District where she and her firefighter partner, James "Denis" Quirke, grew up and would have preferred to stay. But the Sunset had become too expensive and the little Marina-style 1920s house had charm: original gumwood, beveled glass doors, a sunny kitchen and a spacious backyard with potential.
Kelly, who runs a doggy day-care business, and her partner "came in strong" with an offer of $810,000, 35 percent over the asking price of $599,000.
The good news was that they beat out 46 other offers. The bad news was that someone else offered more than 50 percent over asking. The sale closed April 11. "I thought for sure we had it but someone went bananas and offered $910,000 for a house in the Ingleside," Kelly said.
Kelly's frustration is par for the course in a housing market that, with the exception of a few San Francisco neighborhoods, has now surpassed both the early 1990s dot-com boom and the run-up to the 2008 crash. Prices have climbed 33 percent since 2011, with many neighborhoods exceeding that.
And while bidding wars have long been part of buying a home in Noe Valley, Glen Park and Cole Valley, they are now just as fierce in less fashionable areas such as the Excelsior, Mission Terrace and Ingleside.
Citywide, properties are now commanding an average of 10.7 percent more than asking price, according to Paragon Real Estate Group, with Bernal Heights leading the pack at an average of 21 percent over asking. That's up from April 2012, when homes were selling for an average of 3.5 percent over asking.
"Right now I have four buyers that are working to find properties, and they are all cash buyers," said Chris Stafford, a Paragon broker. "They are ready to write a check tomorrow, and we can't seem to get them into places because the bidding wars are just a little crazy."
The art of driving prices up through competition has been around as long as there has been swampland to sell and was certainly prevalent during the bubbles of 1999 and 2006. But this time the imbalance between supply and demand is even more extreme, according to people in the business.
The combination of rapid job growth, a soaring tech IPO market and foreign investors has made San Francisco the most expensive - and competitive - real estate market in the United States, according to Ken Rosen, chairman of the Fisher Center for Real Estate at UC Berkeley. The Bay Area has added 75,000 new jobs over the last three years, and 58,000 more San Franciscans are working than at the beginning of 2010, according to California's Employment Development Department.
At the same time, just 0.3 percent of existing housing stock is on the market, the second lowest percentage in the United States, after San Jose.
Realtor Pete Brannigan of Brown & Co. said "everyone is looking at the same properties and trying to figure out" how much over asking it is going to go.
He said buyers have become conditioned to the idea that everything is going to go 10 percent over asking. So if you price the property where it realistically might sell, some buyers will wrongly assume they are out of the running.
Start low to spark interest
"It's almost a requirement to price at the low end of the range to generate the interest," he said.
Brannigan is currently selling a 3,600-square-foot house at 525 28th St. in Noe Valley. It was listed at $2.799 million. After seven days the seller had three offers, with the top one coming in 20 percent over asking.
All three buyers were offering all cash.
"You've got a lot of cash buyers who turn around and get a loan, but the deal is not dependent on them getting a loan," said Brannigan. "If they got stuck they could still perform."
He said buyers and investors are getting desperate.
"People are knocking on doors and making big, fat offers that are hard to refuse, especially on Liberty Hill," he said, referring to the neighborhood on the Mission-Noe Valley border where Facebook CEO Mark Zuckerberg bought a place.
Karmyn Johnson, a 27-year-old actor and writer who has lived on De Montfort Street in Ingleside Heights since she was 12, said she has received five solicitations from investors interested in buying the family home.
"We like this neighborhood - it's convenient. We don't want to live anywhere else," she said. "I guess it's nice to have people throwing money at you when you want to sell your house, but when you don't, it's a little suspicious."
Pressure on neighborhoods
Pressure on neighborhoods like Ingleside is coming from both directions: Families are not just getting squeezed out of more expensive San Francisco neighborhoods, but also desirable Peninsula communities such as Burlingame and Palo Alto.
"If you can't buy a house for a million dollars in Bernal Heights anymore - and it's really hard - where are you going to go?" said Frank Castaldini of Coldwell Banker Real Estate.
Middle class priced out
At City Hall the bidding wars underscore what has become an increasingly explosive political problem over the past year: the lack of affordable housing. With median home prices over $1 million, a recent Trulia report found only 17 percent of city teachers could afford a home in the city.
Much of the new housing coming on line is expensive: condos selling for $1,100 per square foot or renting for $4.50 per square foot. Mayor Ed Lee has made housing a priority, vowing to build or rehab 30,000 units by 2020, much of it affordable. About 2,125 new housing units have opened since December, the majority of them rentals.
"Housing affordability is the biggest single issue facing the Bay Area economy," said Rosen. "Booms have unintended consequences."
Peter Cohen of the Council on Community Housing Organizations, which represents affordable housing groups, said "increasingly, middle-class people are finding themselves totally priced out of this radical housing market." He advocates for price controls that target a variety of demographics from the poor to the middle class.
"You have speculators going against families - you know who is going to win in that battle," he said. "It makes average families uncompetitive."
Hanging on to S.F. ZIP
Meanwhile, Kelly, who is leaving her long-time Sunset rental because her landlord is moving into the house, finally found a place. In May, she managed to submit a winning bid on Sears Street in the Outer Mission - a 1911 Arts and Crafts house on a dead-end street.
"It wasn't the first choice but it's a good neighborhood, they love the house, and we were happy they were able to stay in San Francisco," said Kevin Birmingham of Park North Real Estate, Kelly's broker.
Kelly said she is enamored with the house, the street and the neighborhood. But as a native she said she is a "little bitter about having to leave the Sunset and a little shocked as a native how nuts real estate prices are."
"We are hanging on to a San Francisco ZIP code by our fingertips," she said.
J.K. Dineen is a San Francisco Chronicle staff writer. E-mail: firstname.lastname@example.org Twitter: sfjkdineen