April 2023: Q1 Sea Cliff - Lake Street Insider
After the big decline in market activity occurring in the 2nd half of 2022, buyer demand rebounded dramatically and most market indicators turned positive in the last two months; open house traffic, number of offers, overbidding and absorption rates all saw substantial improvement. Then the Silicon Valley Bank “issue” and its ripple effect put the market into a bit of a holding pattern. Now, over the past few weeks the result of the SVB debacle (including pressure on First Republic Bank, which is San Francisco-heavy on clients and mortgages) has pushed more buyers to make all-cash offers versus financed offers. Although the Fed seems determined to backstop all losses; deposits or otherwise, the message heard was to reevaluate your own diversification strategy. As we roll into a bit of a delayed spring, I expect to see more inventory and assuming the Fed takes a more relaxed approach to interest rates, more buyer activity.
As far as what is happening in the general San Francisco market, deal flow is clearly down. If you compare ‘Q1 2022 vs. ‘Q1 2023, it’s apples and oranges. Looking at the numbers below, the data shows closed transactions are not just down, but way down. Keep in mind that in ‘Q1 2022 a buyer could get a 3% mortgage vs. ~6.5% in ‘Q1 2023.
Although transactions are down, buyers are competing for good, well-priced properties. With that being said, my “boots on the ground” sense in San Francisco is that some sellers and their agent(s) are having a tough time pricing their properties appropriately for the market. Is the home better or worse than the comps? Are some of our finishes outdated? Should we price below the competition? The result of this scenario has put many buyers in a position to be hesitant when they see a home they really like. Why has the home not sold yet after 15 days? They have 16 disclosure packages requested but no offers, what is wrong with the home? Why is it priced 10% over the neighborhood comps? I’ve seen some buyers get some very, very good values on homes that were move-in ready, spot-on properly priced, yet the interested buyers all (but one) hesitated. When you see a property you like, you need to quickly do your due diligence and be prepared to move quickly (or not).
On to our corner of the City.
As I mentioned earlier, buyers are competing for good, well-priced properties. 17 25th Avenue North is a good case in point. The home was listed in late February for $6,875,000. It had three offers and was pending after the first week of showing. This means there are two $7M Sea Cliff buyers that are still looking. Sadly, there is currently only one home available in Sea Cliff that meets the $7M budget (and it obviously didn’t meet the needs of either buyer).
In terms of ‘Q1 activity, Sea Cliff sellers are on the sidelines. There are a few homes on the market, but the sub-$10M inventory is non-existent. We had one sale last quarter and the home was never listed (99 25th Avenue). I walked it last fall and it was a complete fixer. It sold for $3M which I thought was a bit light if the seller wanted to put it on the open market. Apparently quick and easy was preferred.
In the Lake Street Corridor, sales were on par with other ‘Q1 activity. Of the seven sales, most were cash buyers and the transactions closed within a few weeks of listing. The takeaway is that we have pent-up demand for the area as there are a lot of cash buyers in search mode. A good example of demand in the Corridor is 1400 Lake Street. The home was listed at $3.998M, has great curb appeal and scale, yet had no yard and needed numerous interior upgrades as it had been in the same family since 1971. It sold for asking in the first week of listing (yes, a cash buyer).
I expect the inventory to move upwards in the neighborhood in ‘Q2 as we dry out from a wet winter. The numbers for the quarter.
Here are the top sales of the quarter. As mentioned before, 99 25th Avenue was never listed and 2212 Lake Street was a fantastic home.
A takeaway from this report; if you are on the fence about selling, and your home is valued under ~$8M, there are buyers with cash looking today! Don’t want to deal with the home prep and open houses? The off-market activity over the past six months has been good and we can expose the home to a “target rich” pool of potential buyers (without the need for public showings and disruption). Give me a call if this is something worth discussing.
That is it for now. If you are ready to move up, trade down or simply out of the City; let’s put a plan in place to make the most of your asset. Likewise, if you have friends or colleagues looking to get into the neighborhood market, feel free to pass my name along.
Call or email, anytime.