A look back at our 2012 East Bay Real Estate Market

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With my husband David at the Mad Men-themed Awards Party

I was truly honored to be chosen 2012 Berkeley REALTOR of the Year. The highest honor of my Association, it’s an award voted on by my peers for ethical behavior and contributions to the industry. I’m pleased and proud!

Here’s my 2012 Market Summary:

Many of you know that we just ended a year of extremes. Following a year of very little motivation either for buyers or sellers, 2012 started off with only a bit more activity, and a few fortunate listings receiving multiple offers. I was pleased that the listing on Creston I brought on in February received multiple offers and did very well, as did all of my listings!

The SF market heated up quickly after the first of the year. It took until the middle of March for buyers in our EastBay market to decide to take action. Then it felt as if a master switch had been flipped, and all the buyers jumped in together! Suddenly there were way too many buyers chasing way too few properties, and that’s how the year ended. Homes either received lots of offers and sold over list, or if slightly over-priced (or under-presented) they sat for a few months. Even during the normally-active fall, there was less than one-month’s inventory available, resulting in higher sales prices in each of six cities I cover: Albany, Berkeley, El Cerrito, Kensington, Oakland and Piedmont. Oakland will show the highest increase; early numbers show as much as a 22% rise from Q4 a year ago.

What drove the change? Interest rates were low in 2011, and dropped a bit more in 2012. But I believe two factors were the main ones at work. Many buyers needed to see that prices had hit bottom and were starting to rise before they were motivated to buy. Others were motivated by rapidly increasing rental rates. Oakland rents increased by 19% in 2012. San Francisco rents for a 600-900 sq. ft. apartment rose to an average of $3K/month, a level that would support ownership costs of a $700K home!

There was an amazing amount of cash in our market, more than we’re used to. Foreign money? Yes there was some, but much of the cash was from buyers who have distrusted the stock market, or families pooling resources. There were all-cash sales at all price points.

Capital gains remain protected for the first $250K for a single seller, $500K for a couple filing jointly. Fears of capital gains law changes (fortunately avoided) had many sellers bringing homes to the market well into December, not something we normally see. Insurance became more difficult to acquire for homes with knob-and-tube wiring, which is common in older homes. Most current policies grandfather this condition; be careful before switching carriers if you have not completely upgraded your wiring.

A few trends gained strength. The biggest was the demand for close proximity to amenities. Homes close to public transit, shopping and especially coffee got lots of attention. Fully-updated homes continue to attract the highest prices.

For sellers: 2013 should be an excellent year to sell. We know that buyers are out there in force. They will pay a great deal for what they want, but they are price-sensitive. Buyers in our area are used to a high standard of presentation, and thorough disclosures. I’m hoping sellers will not wait for values to hit the mystical highs of 2006—they only existed if you sold then! And some homes are at their highs now.  If you know someone who is thinking of getting ready, I’d love to speak with them in depth about the details—so much of preparation is in the details!

Owners who aren’t really planning to move: If you have not refinanced recently you should! I’m happy to recommend local loan brokers who work with local appraisers. And if you’re wondering how your home value may have changed, I’m happy to prepare a market analysis for you, or your friends.

For friends who are buyers: those in the market in 2012 had lots of company.  Most buyers need to experience a few unsuccessful offers before they are willing to accept what this highly competitive market demands: few contingencies, all as short as possible, and a clean, high offer. It’s been difficult to judge what should be the correct offer price, as there were very few comparable sales. Appraisals were tricky. Using a strong local agent, local loan broker and being completely pre-approved has never been so important.

Next up: a look at the numbers.

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