Saturday, May 16, 2015

Three Tips for Finding Unicorns in the Berkeley Residential Real Estate Market.

174 homes have sold in all of Berkeley since the beginning of 2015. In the year's first four-and-a-half months we have seen some intense competition in our housing market. One house on Cherry Street listed for $970,000 closed escrow at $1,600,000-- a whopping 167% of its asking price. Fifty of the properties sold at least 25% over their original price. Finding your way out of the intense competition can seem like searching for unicorns.

It is an undeniably competitive market, but not every house sells substantially over its asking. The average sold over asking price for all 174 sold properties is 115%. April saw a 34% increase in new inventory over January’s dismal offerings. An upswing in inventory has piqued our optimism. We are hopeful that our clients will find new opportunities in the summer market.

Still we are realistic.  Many buyers will brave the stampedes and continue to bid aggressively. If you are looking for the picture perfect bungalow within steps of Peet’s Coffee and the Cheese Board, it is likely you will still be cliff diving into the most competitive waters. For the more conservative buyer, here are our secrets to finding the unicorns:
  1. Explore New Territory: Unicorns don't travel "tree-lined streets" in "coveted neighborhoods." A home on Grant quoted as “prime location” achieved 155% of its asking price, while another on Acton advertised as “fantastic location” got 150% of its original price. Although it’s hard not to covet Berkeley's most popular zip codes, consider up-and-coming neighborhoods as an alternative. Look for neighborhoods with strong commercial anchors like the developing Gilman District. In addition there are opportunities just north of Berkeley's borders in towns such as Kensington.
  2. Embrace the Akward! Unicorns have horns. Hornless homes in great shape command premiums. A home in the Berkeley Hills on Alamo referred to as “pristine” sold for 60% over, and $450,000 over the listed price. Another “beautifully updated” home on Shattuck sold for 46% over. Conversely, a home on Dwight with “potential” sold at 90% of its asking, and one on Spaulding needing TLC sold at only 92% of its asking price. However, don’t assume you’ve lassoed your fantasy creature just because you’ve found an easy fixer. On Spruce Street, one “contractor’s special” in really poor shape listed for $599,000 and cleared $850,000. If it’s got that great zip code (see #1 above) or fabulous architecture, you might not be in unicorn habitat. In fact, pristine is uncommon. Most of our housing stock was built prior to WWII, so it is safe to assume most homes need some TLC. Even the houses with the new paint and cute staging can have skeletons in their closets. Yet, the paint and staging is often enough to draw competitive offers. True unicorn seekers should instead get excited about unusual layouts. Awkward floor plans can confuse the competition. Also remodels done in poor taste might be hidden opportunities. Sellers tend to price these on the high side, because they value their own improvements. Then, the unappealing design fails to entice area buyers. If your choice is either to pick the cute popular home (that includes reports which you will be expected to accept in “as is” condition), or head over to the house with the lousy floor plan or home depot upgrades, keep your eye on the latter. Chances are, what you save in competition may pay for a designer or architect’s time to help you reimagine the aesthetic.
  3. Look for the Overpriced and Overlooked: Look for the unicorns that haven’t been snapped up by week two. Focus on properties that have been on the market for longer than thirty days. They do exist! Of the 174 properties that have closed so far this year, 30 were on the market for longer than 30 days. Not all were overpriced. Four properties actually raised their price as a strategy and closed escrow at an average 110% of their original asking. 13 of the 30 did take a price reduction, but even so the reductions were slight averaging 7%.
Happy hunting.  Regardless of where you invest, a Berkeley Hills Agent can help you find what your seeking and help you succeed at your goals.