Sales prices for existing homes in Pleasanton have been increasing dramatically while the number of homes for sale is plummeting just as quickly. From first quarter of 2012 to first quarter of 2013, the median sales price of homes in Pleasanton's two zip codes has increased 33.3%, but the number of sales has decreased 44.7%. Buyers and sellers both are asking if this is another "bubble" like the one that burst a few years ago.
Local Realtors report that when a home hits the market, the seller is immediately bombarded with multiple offers. To purchase one of these elusive homes, buyers must either have significant down payments and solid financing or be able to make an all-cash offer.
Two local real estate experts helped make sense of the current market and offered advice for both buyers and sellers.
Craig Ragg, the 2013 President of the Bay East Association of Realtors, who has more than 25 years in real estate, said the market fundamentals are different from the heady days of the real estate bubble circa 2005, but the pressure on buyers is just the same -- or worse.
Bay East President-elect Jennifer Branchini agreed. Asked about how a buyer can compete for the few homes on the market today, Branchini, who is both a Pleasanton homeowner and works from a Pleasanton-based brokerage, said, "It depends on how much of a down payment; the stronger the offer the better chance you have."
"Buyers need to get out of the mindset that they will make an offer and wait for it to get countered. Today, they're competing with other buyers before they can start negotiating with the seller," Ragg added.
All-cash offers are becoming commonplace, but the majority of home sales still use some combination of a down payment and financing. Also, while interest rates continue to be at historically low levels, there are still challenges related to securing purchase financing.
Both Branchini and Ragg agreed that the highest offer doesn't always get accepted.
"Some sellers toss out the high offers because they aren't confident the home will appraise," Branchini said.
When asked about difficulties buyers may have getting a loan, both said their current clients are not having bad experiences securing financing.
"Buyers today are better qualified for financing than they were three years ago," Ragg said.
"Many of my clients have at least 20% for a down payment, which helps them compete," Branchini said. "It's about aligning yourself with a lending institution that actually makes loans."
Ragg mentioned there is more to a successful offer than how much money a buyer brings to the table.
"It depends on what kinds of terms a buyer will offer, such as waiving contingencies related to purchase financing and the condition of the home," Ragg said.
While today's market may seem to favor sellers, Ragg observed, "sellers need to recognize that once they sell they will be in the same position as their buyers. But dealing with a local agent who has a good reputation can help a buyer compete."
"You need to work with an agent that can work outside of the box and try some alternatives," he added. "Sellers that want to be buyers need to be flexible, and that's where the creativity comes in."
Some sellers negotiate renting their home from the buyer while they shop for a new home. Branchini explained that this tactic has challenges and opportunities.
"Some clients will sell, then lease another home while shopping for another home," she said. "This strategy gives them more time to find the right home."
"In that case a buyer needs to be prepared to move twice," she noted.
The current big increases in sales prices echo market conditions from 2005. The median sales price for a single-family detached home in Pleasanton during March 2013 was more than $800,000. That's a 24% increase from March 2012. The combination of low inventory, rising prices and multiple offers begs the question: Is this another real estate "bubble" and when will it burst?
"How can there be a bubble when there are investors with cash and buyers with significant down payments?" Branchini asked. "Prices have gone up dramatically, but it's starting to level off. Meanwhile, many buyers are priced out and are now waiting for more inventory to come on the market later this year. It's not about a price bubble but a lack of inventory."
"When 30% of the offers are cash, that's not a bubble," he said.
Both said the market is very different from 2005 because loan underwriting is stricter, loans are realistic, and there are significant down payments.
"It is challenging to buy, but the deals are being done," Ragg said. "You need to be patient and work with a real estate professional who can really help."