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This Housing Market Is So Hot That Buyers Are Offering $1 Million Over Asking Price

May 23, 2021 by Staff Reporter

Buying an income property can be a smart move for real estate investors — except when demand is so high that the premiums homes fetch are so ridiculous it’s hard to imagine how they could make financial sense. Such is the case in the San Francisco Bay Area today.

Home values are up across the board

On a national level, there’s a major housing shortage. That, combined with historically low mortgage interest rates, has fueled a surge in buyer demand that’s driven home values up across the country. In fact, the median sale price for an existing single-family home rose 16.2% year over year during 2021’s first quarter, reports the National Association of Realtors (NAR). And the country’s most expensive markets saw record growth as well.

That extends to California, where many metro areas have home values that are well above the national average. Specifically, during the first quarter of the year, the San Francisco-Oakland-Hayward area saw a whopping 21.8% jump in growth as far as home prices go. But part of that could have to do with the fact that desperate buyers are offering insane numbers to scoop up property in the area.

San Francisco remains hot

The San Francisco housing market is clearly as desirable as it ever was, despite the fact that property values were high even before the market tightened up. But now, low inventory has some buyers going well over asking prices, which is making a lot of local investors very wealthy.

Case in point — a home in Berkeley sold for more than $1 million above its listed price this past March. But that sale wasn’t such an outlier. Real estate agents across the Bay Area are seeing shockingly high offers as buyers are growing increasingly aggressive.

To be clear, the Bay Area is a market where bidding wars aren’t uncommon. But buyers aren’t just offering well above asking price in today’s market — they’re also offering cash. In fact, in April, a Berkeley home listed for $1.995 million closed, in cash, at a whopping $3.15 million.

A prime opportunity for local property owners

Clearly, now’s not the time for budget-conscious real estate investors to attempt to break into the San Francisco area market — despite the potential upside of owning an income property there. On the other hand, investors who already own homes in the area are in a prime spot to make a killing by listing those properties sooner rather than later, while there’s very little competition.

Despite low inventory and inflated home prices on a national level, right now’s a good time for investors to scoop up income properties in up-and-coming cities, where home values have yet to skyrocket. As such, it could pay to sell a San Francisco home at a premium and use the proceeds to scoop up a number of additional properties for a nice diverse portfolio.

While the San Francisco housing market will likely remain strong well beyond the current inventory crunch, the reality is that once the market opens up, homes may not fetch $1 million over asking. As such, now’s the time for local property owners to capitalize on what could be a once-in-a-lifetime opportunity.

Originally Appeared Here

Filed Under: REAL ESTATE

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