QUESTION for BP-observations on market (Oakland duplex buyer)

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QUESTION for BP-observations on market (Oakland duplex buyer)

Joe Aamidor
Rental Property Investor · Bay Area, CA · Member since 2018 · 29 posts · 15 votes

Hi all,

I'm interested in getting feedback from others on what I am seeing in the market these days. 

We have been looking for a duplex/triplex in Oakland since the start of 2019. We've not seen that much that meets our criteria, but lately, we seem to be seeing more homes getting pulled from the market than selling. 

The process seems to be fairly consistent - a home is listed at an under market price, then 2-3 weeks later (after the offer date) it is raised 30-40 percent. Then the sellers say they are using "transparent pricing" - and our realtor usually can get some details on this from each seller. In general the sellers either don't get offers or they get offers close to ask (while the sellers were expecting a bidding war that would drive the price much higher). 

Then, at the new price, the property sits a few months, and if it doesn't sell, it just gets pulled. These homes may be re-listed in the future, time will tell. 

Is this what others are seeing, too?

My take is that sellers look at what sold last year, and want to sell for even more - but buyers aren't spending it. It seems that prices in general are back to 2017 levels, off the 2018 highs. As a buyer, when I see this, I'm apt to wait on the sidelines until sellers are more realistic. But it's also surprising that sellers can be so opportunistic with selling/not selling a vacant property. We've seen properties that were bought 10 or more years ago at 25 percent current asking price, so it is a bit odd that sellers are holding out for an additional let's say $100K when they already stand to make $500-700K on the sale. But I'm not the one selling a home

Is my take on what's happening accurate? Any other thoughts? 

Just thought others might have insights or experiences to contribute here!

Joe

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Brian Garlington
Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
6y

@Joe Aamidor     You should get your license :-)    

What we are finding in the East Bay is that residential multifamily is still going at a premium if the property is vacant or if the rents are even close to what market rates are....those are getting snapped up fast and if the asking price matches the comps they are still going above asking in a lot of cases. 

If the residential multifamily has rents that are way below market rate.....and I still see a LOT of those.....and if it's in a rent control city like Oakland and Berkeley and Richmond....then those are still sitting there on the market and will continue to sit because you can't "evict" those tenants (especially right now). Those folks may be open to "creative offers" right now.

If it's a single family home that is vacant those are also going pretty fast, but a number of people that are buying these are doing so to utilize as rentals as a hedge against inflation. Again...if the list price is in line with the comps those are going at around the list price.

If it's a SFH that is still owner occupied....those are the sellers we see as getting nervous because not as many people...including inspectors, appraisers and potential buyers are open to setting foot in those properties and it could be a pain to do a lot of other things. Those folks are probably open to more "creative" offers right now.

Once the shelter in place is lifted here in the East Bay there will definitely be more inventory hitting the market....more so then in years past.....this will create more supply than normally seen. 

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  • Account Closed
    Rental Property Investor · Oakland, CA · Member since 2014 · 730 posts · 1k+ votes
    7y

    One word: greed 

    0Reply
  • Brian Garlington
    Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
    7y

    @Joe Aamidor    @Account Closed

    I would put offers out there still.....AND put them out there in a way the numbers work for you...maybe slightly under asking price. We saw this same stuff happening in the mid 2000's....right before the correction because owners were thinking they could always still get a bidding war ......however....less of the general public is trying to buy rentals in Oakland because of rent control, etc......but the smart people like us have a different thought process.

    1Reply
  • Joe Aamidor
    OP
    Rental Property Investor · Bay Area, CA · Member since 2018 · 29 posts · 15 votes
    7y

    good points @Account Closed - the issue I am seeing is that the asking prices are starting to get too high and too hard to justify (unless you assume this month homes are a few percentage points above last month). So an offer slightly under ask is even too high. 

    Example:I'm thinking of one home in which the sellers agent told our agent - "here's a comp to justify the price", and that was the same price as their original let's-spark-a-bidding-war price. It was generally a fair price, and the market justified it. Then they raised the asking price by 40 percent, way higher than the agent even thought it would sell. So, there was no way I was going to get even close to ask (the new ask). But, it also seemed clear that an offer around their original, market-justified asking price, was a no go.

    Definitely greed is at play, and if you have a lot of equity in the house, maybe you'd prefer to just wait a year. I'd argue there's more of a chance that prices are lower next year than they are higher...

    1Reply
  • Brian Garlington
    Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
    6y

    @Joe Aamidor     What did you end up buying?

    1Reply
  • Joe Aamidor
    OP
    Rental Property Investor · Bay Area, CA · Member since 2018 · 29 posts · 15 votes
    6y

    @Brian Garlington - nothing yet!!

    1Reply
  • Brian Garlington
    Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
    6y

    With what's been going on lately in the stock market, sellers may not be trying to "play games" with that strategy you saw last year. That's what we are starting to see. 

    @Joe Aamidor

    0Reply
  • Joe Aamidor
    OP
    Rental Property Investor · Bay Area, CA · Member since 2018 · 29 posts · 15 votes
    6y

    yes, I hear there are homes going off market and in general, since a very low offer price is going to lead to a lot of low ball offers, I suspect the asking prices are more in line with what sellers actually want.

    a couple other things I'm watching:

    -this is typically the time of year that a lot of houses are listed, and in many neighborhoods, you see listings staggered (so only a few at a time) - that's all out the window if we have a shelter in place through May - there will just be a lot of supply on the market at one time

    -a lot of homes (we hear) were being fixed up before they were listed. So, now the sellers are sitting on that investment, unable to recoup it (I think that even homes going pending now will have a contingency to let the buyers walk the property before closing)

    -what happens with the local economy? if many firms cut even 5 percent of their workforces, I think we have a very different real estate market (less demand and MAYBE more supply)

    2Reply
  • Spencer Hsu
    Realtor · Palo Alto, CA · Member since 2016 · 76 posts · 20 votes
    6y

    It'll be interesting to see for sure with renters not being able to pay due to the layoffs in certain industries. Of course, the local dynamics will be different for each area and inventory is still extremely low.

    0Reply
  • Chris Meadors
    Real Estate Agent · Napa · Member since 2019 · 15 posts · 7 votes
    6y

    @Joe Aamidor We are advising our clients in Napa that there is a short window right now to get a great deal, if you find the right seller.

    You have to find the right seller.

    IF you find that right seller, the truly motivated seller, you can buy at a discount right now. I would find an agent willing to make a lot of phone calls and ask “how motivated are your sellers” and eventually you’ll find one who is. Or just make a ton of offers and hope to gain traction.

    It might be worse in 8 weeks, but on the hand it might go back to normal(ish).

    Best of luck to you. The East Bay real estate pricing is on a different planet. I feel for you!

    0Reply
  • Brian Garlington
    Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
    6y

    @Joe Aamidor     You should get your license :-)    

    What we are finding in the East Bay is that residential multifamily is still going at a premium if the property is vacant or if the rents are even close to what market rates are....those are getting snapped up fast and if the asking price matches the comps they are still going above asking in a lot of cases. 

    If the residential multifamily has rents that are way below market rate.....and I still see a LOT of those.....and if it's in a rent control city like Oakland and Berkeley and Richmond....then those are still sitting there on the market and will continue to sit because you can't "evict" those tenants (especially right now). Those folks may be open to "creative offers" right now.

    If it's a single family home that is vacant those are also going pretty fast, but a number of people that are buying these are doing so to utilize as rentals as a hedge against inflation. Again...if the list price is in line with the comps those are going at around the list price.

    If it's a SFH that is still owner occupied....those are the sellers we see as getting nervous because not as many people...including inspectors, appraisers and potential buyers are open to setting foot in those properties and it could be a pain to do a lot of other things. Those folks are probably open to more "creative" offers right now.

    Once the shelter in place is lifted here in the East Bay there will definitely be more inventory hitting the market....more so then in years past.....this will create more supply than normally seen. 

    2Reply
  • Jonathan Payne
    Real Estate Agent · Oakland, CA · Member since 2015 · 14 posts · 6 votes
    6y

    Great assessment from @Brian Garlington...totally agree. The good ones are still going for a premium. 

    I do think we are going to see a lot of inventory hit once the SIP is lifted. There are some opportunities out there now, but obviously limited. 

    @Joe Aamidor  What is your budget? Over the last year I've seen the better deals on the higher end buildings, over $1.2-3. The ones under 1 Mil are still competitive, especially when vacant.

    0Reply
  • Brian Garlington
    Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
    6y

    @Jonathan Payne   Agreed

    0Reply
  • Joe Aamidor
    OP
    Rental Property Investor · Bay Area, CA · Member since 2018 · 29 posts · 15 votes
    6y

    good points all. I learned that OFFICIALLY, only vacant homes can be listed now - and that may lead some occupied homes to not get listed at all (the current owners just stay). Our realtor also told me yesterday that there are some people buying now -specifically because they anticipate getting laid off (or think it may be likely) and want to make sure they can get prequalified. This seems very odd to me!

    I think the big open question is employment - lots of startups are laying people off. Does this spread to tech more generally? That seems like it will have the biggest impact on prices and supply vs. demand. 

    0Reply
  • Frederick Kuo
    Member since 2018 · 21 posts · 12 votes
    6y
    Originally posted by @Brian Garlington:

    @Joe Aamidor     You should get your license :-)    

    What we are finding in the East Bay is that residential multifamily is still going at a premium if the property is vacant or if the rents are even close to what market rates are....those are getting snapped up fast and if the asking price matches the comps they are still going above asking in a lot of cases. 

    If the residential multifamily has rents that are way below market rate.....and I still see a LOT of those.....and if it's in a rent control city like Oakland and Berkeley and Richmond....then those are still sitting there on the market and will continue to sit because you can't "evict" those tenants (especially right now). Those folks may be open to "creative offers" right now.

    If it's a single family home that is vacant those are also going pretty fast, but a number of people that are buying these are doing so to utilize as rentals as a hedge against inflation. Again...if the list price is in line with the comps those are going at around the list price.

    If it's a SFH that is still owner occupied....those are the sellers we see as getting nervous because not as many people...including inspectors, appraisers and potential buyers are open to setting foot in those properties and it could be a pain to do a lot of other things. Those folks are probably open to more "creative" offers right now.

    Once the shelter in place is lifted here in the East Bay there will definitely be more inventory hitting the market....more so then in years past.....this will create more supply than normally seen. 

     Excellent points Brian and it certainly mirrors a lot of what I've been seeing. So essentially trends that had already existed prior to Shelter in Place are being exacerbated by the onset of the ordinance. Properties that were challenging to sell before, multi-unit rentals with below market rents in rent control cities, owner occupied or tenant occupied SFHs, etc. just become even more difficult to sell in this market. One particular real estate segment that I think will probably suffer a disproportionate hit however would be the commercial retail market. Many retail businesses depend on social gathering and they have been hit hard, and many will probably not return due to the extension of SIP guidelines. They were already suffering from the rise of automation and online retail before and this crisis has expedited those trends. I think this real estate segment will be hit hard and will take the longest to recover if it does, from this crisis.

    0Reply
  • Brian Garlington
    Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
    6y

    Agreed

    0Reply
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