Top 5 Things I HATE Most About the San Francisco Housing Market

Housing affordability is at an all-time low right now with sky-high home prices and interest rates hovering around 7%. And to make matters worse, even for those who are fortunate enough to be able to afford to buy a home in the Bay Area, there are facets of the Bay Area housing market that make being a buyer in today's market even tougher. And if you're not prepared to navigate these obstacles, you're going to fail. I'm Austin Klar, your lawyer turned real estate agent in San Francisco and Marin County. I spent nearly 9 years working as a lawyer at one of the biggest law firms in the world in downtown San Francisco before getting into real estate. And now I represent buyers and sellers in the largest, most important financial decision of their lives, buying and selling their home. I've helped buyers move to the Bay Area from all over the world and have taught them how to navigate the complexities of this very fast-paced, very unique, fast-changing environment that is the Bay Area housing market. And in this video, I'm going to go over the biggest obstacles buyers face in today's market, the things I absolutely hate the most about the San Francisco and Marin County housing markets for buyers. And I'll go over things that you can do to best position yourself to win in this very complicated market. Let's get right to it. The first challenge buyers face in today's market is general timing. Even with the market generally slowing down since the peak of the pandemic market, right when interest rates started to rise in the middle of 2022, turnkey properties in desirable neighborhoods are selling incredibly fast. As of summer of 2024, when I'm filming this video, homes on average in San Francisco and Marin County were both selling in under a month. And there are countless examples of properties in the most desirable areas of those counties, places like Presidio Heights and Pacific Heights and Seacliff in San Francisco, or like Ross and Kentfield and Larkspur in Marin County, where homes are selling way faster than that. A lot of them sell in just a few days on the market, and there are plenty of examples of homes selling before they even hit the market. It's very common practice for desirable properties to come on the market, hold maybe one weekend of open houses and then set an offer date for sometime the following week. So you have very limited time to actually get into the house, tour, and make a decision. Sellers are forcing buyers to the table by setting deadlines and creating a fear of loss if you don't submit an offer by the offer deadline. So what that means for buyers in today's market is they don't have nearly as much time as they did in prior housing markets to do tours, do their diligence, maybe visit the property multiple times, and take their time to actually make a decision. And this is particularly challenging for buyers who are moving here from out of state or out of the area. And even if you do live in the area, you have a full-time job, you have other obligations, maybe you have kids, maybe you have family, you can't drop everything on a whim to go tour a property the moment that it comes up. So as a buyer in today's market, how do you account for this really fast-paced environment? Well, obviously you need to be relying on your agent, right? Your agent needs to be doing as much as possible to tour things in advance so that you're not wasting your time on properties that probably aren't going to be a good fit for you. So touring properties before they even hit the market or right when they hit the market is going to be incredibly important. And they also need to be communicating with you their thoughts on those properties so that you know which ones are actually worth going to. And if you live out of town or just happen to be out of town when something comes up, then make sure your agent's going there and FaceTiming with you or getting video for you so that you're not losing out on that precious time. Austin Klar. You can't just go off the pictures and the listing videos. You need a video that is showing you the actual layout of the property, the light in the property, the actual street itself, the neighborhood, whatever you can do to put yourself in a better position to understand the property before seeing it. I've got clients right now moving from Lake Tahoe, moving from New Jersey, New York, England, Dubai. I do everything that I can to see properties for them in advance and get them the information that they need. I take video when I can. I FaceTime when I can. You have to be doing that, especially if you do not live in the area. You also need to be reviewing the disclosures as quickly as possible when they're available. I go through them and send a summary of what I think are the most noteworthy items, things that my clients are going to care the most about— structural issues, electrical issues, plumbing issues, roof issues, pest issues, you name it— so that they know whether it's worth their time going forward. And for buyers, they need to be really honest with themselves about what they want and what they can afford. You don't want to be wasting your time looking at properties you can't afford, and you also don't want to be not looking at things that you can afford. There's things buyers can do too themselves. They need to be really honest with themselves upfront about what they want and what they're willing to spend to get it. So you need to be really honest about your budget, about what your maximum and minimums are. You need to be honest about square footage, about bedrooms, bathrooms, outdoor space, parking, all the different facets of a property. Mm-hmm. Make sure you're capturing everything you possibly can upfront so you're not missing out on anything because the right thing might come along. If you're not looking at it, it'll be gone. Make sure if you're getting a loan, you've started that preapproval process with your lender. The last thing you want to do is wait for a property to pop up and then be waiting on your lender to get you everything that you need before you can make an offer on that property and somebody else takes it from you. You need to be in a position to strike immediately when the right thing comes along. If you're paying cash but need to sell a bunch of stock to have the cash to buy the house, make sure you have a plan in place and know the timeline so that when the time comes, you're able to do that quickly. I wish things were a bit slower here. I wish buyers had more than 15, 20, 30 minutes to tour a house before, you know, kind of making a decision about whether they want to move forward with it. I wish there was more than one weekend available to tour before people had to make a decision about whether to move forward with it. But that's the environment that we're in and we have to roll with it. Yeah. By the way, if you're thinking about relocating to San Francisco or Marin County and are having concerns or trouble navigating the market, definitely reach out to me. I've helped countless buyers move to those areas and I'd be happy to help you. My contact information is in the description below. And if you want to stay up to date about the Marin County and San Francisco housing markets and what day-to-day living is like in each of these places, definitely subscribe to my channel because I make videos about that stuff every single week. Now back to the things that I hate about the housing markets here. The next thing that drives me nuts is the lack of price transparency. If you study the market, even for a few minutes, you will understand that there is often a huge discrepancy between what something is listed at and what something ultimately sells for. Sellers routinely set their list prices well below what the market value of a home is to drive action, drive competition, and create bidding wars. So if you're thinking about spending $2 million on a property, when you're searching, you can't necessarily rely on properties that are listed at $1.9 or $2 or $2.1. You might need to look at properties that are listed at $1.4, $1.5. There are so many examples of properties here selling $400,000, $500,000, $600,000, $1 million over ask. It's not because people are overpaying, it's because sellers are intentionally listing things super low. So how do you prepare for this as a buyer? Well, one of the best things that you can do up front when you're trying to figure out what the right number is for your budget, look at what has sold in the past. What has sold in the range that you're trying to spend, that you actually would've put an offer in on. If you're looking at 100 different homes that have sold for $2 million and you wouldn't have put an offer in on a single one of them, then you either need to adjust your expectations or you need to adjust your budget. You also need to stay on top of what's generally going on in the market and you need to understand how that market compares to the market where the comparable properties that you're looking at sold in. What's happening with interest rates? What's happening with days on market? What are absorption rates and monthly supply changes? What are the inventory changes? What are the pricing dynamics? You need to be on top of all those things by leaning on your agent to educate you about those things so that you know whether this house that's listed at $1.95 million is going to sell for $1.95 million or it's going to sell for $2.5 or it's going to sell for $1.7. I've had multiple offer situations where I won and I was well under ask. I've had multiple offer situations where I've won and I'm way over ask. It really depends on the property and the situation. There's no one-size-fits-all rule here. You just need to be on top of what's going on in the market and lean on your agent to educate you about that. The next thing I wish I could change about our housing market here in San Francisco and Marin County is the inventory situation. When you combine the fact that homes are selling very quickly with the fact that there just aren't that many homes on the market, you get a really tough inventory situation. In San Francisco right now, there are less homes for sale at this time in July of 2024 than there have been in the past 10 years. People simply aren't listing their homes because most sellers are going to go buy another home. And it's really expensive to buy that next home right now because of where home prices are and where interest rates are. So a lot of people are staying put and that's creating a lack of inventory. While we have people not listing their homes for sale and homes that are for sale selling really fast, we've had population dynamics change over the past decade. More people have moved here over the past decade. There are just more people here now than over the past decade. Austin Klar. More people have reached the age of home buying than there were a decade ago. So not only do we have fewer homes, like, actually for sale, we have more people vying for the homes that are available. So it creates a really tough competitive inventory shortage. That's why we've had such rapid price growth in the Bay Area over the past decade. That's why days on market are very low in San Francisco and Marin. That's why we have so many properties selling with multiple offers well over ask. So how do you navigate, you know, a really tough inventory situation, especially in the market that we're in right now? Well, off-market properties are a good place to start. Off-market properties are a little bit more common in Marin County than they are in San Francisco, and that's because of different rules that apply in Marin County than in San Francisco, but they generally occur in both counties. In Marin, agents are allowed to post on places like Instagram and TikTok what properties are available, even if they're not putting that property on the MLS. So believe it or not, a great thing to do is if you're looking in a particular area in Marin, is to follow a bunch of the agents that do a lot of business in that area. You will see a lot of inventory on Instagram or on TikTok or on YouTube, whatever the platform is that isn't on Redfin or Zillow. In SF, you can't do that. If you are going to publicly market something, it has to be on the MLS. So really what you need to do in San Francisco is rely more on your network. You need relationships with agents which you develop, you know, over your years in the business, touring a bunch of properties and doing transactions with a bunch of agents. And that's how it works in Marin too. You're not just relying on social media, but you do have social media as an extra resource in Marin that you don't necessarily have in San Francisco. There are other things agents can do as well. Whenever I'm, you know, starting to work with a new buyer, I'll send emails to agents, you know, who work in the areas that my buyers are looking in and say, hey, I've got a buyer looking for XYZ. Do you have anything coming soon or anything that might be available? I've sent letters to owners of homes that fit the criteria of what my buyers are looking for, saying, hey, I know You might not actually be thinking of selling, but I have somebody who wants exactly what you have. Sellers might not even be thinking about selling something until a letter hits their door saying, hey, I've got a buyer willing to pay X for your house. And that kickstarts a conversation that otherwise might not have happened. There's not really a whole lot we can do to better the inventory situation here, you know, short of building more housing. That's not within my control. But there are some things we can do to unlock hidden inventory. And the lack of inventory brings me to the next thing that I wish I could change about our housing market, and that's competition. As I mentioned before, because there's not a lot of inventory on the market, homes routinely sell with multiple offers. If something is turnkey in a desirable neighborhood, guess what? You're not the only person looking for that. You're most likely gonna run into some competition. There's no way around that. So the best thing to do to manage that is to stay in constant communication, or for your agent to stay in constant communication with the listing agent. Understand what the state of play is, how many disclosures are out, how many people are actually reviewing the disclosures, how many people have are asking questions, how many agents have said, hey, my clients want to write an offer. So really gauge as the process goes along what the activity situation is like. So you can see, are there going to be multiple offers? How many offers? What price range? You get whatever information you possibly can out of, out of the listing agents. And a lot of times, because, you know, during the process I'm so overcommunicative with listing agents, they share a lot with me in response. You know, sometimes you get listing agents telling you exactly what price to come at. How many offers they've received so far. They tell you exactly where to position yourself and helps your clients win. That doesn't always happen, but all you can do is put yourself in the best position to maximize the chance of stuff like that happening, maximize the chance that you'll win. Now, there are definitely properties where you're less likely to compete. Obviously, more expensive properties have less competition. Properties that need a lot of work, fixers or tenant-occupied properties often have a lot less competition. And you can focus on just those things. You can look at properties that have been on the market for over 45 days, have had price cuts, have been sitting at a price for a while without a price cut or were recently canceled listings or expired listings. You can go after things that less likely other people are going to be go after as well. And the last thing I hate about that I wish I could change is the insurance situation. Insurers have been pulling out of California left and right and many aren't underwriting new policies. And the few that remain and are willing to underwrite new policies are really digging into the condition of homes, how old the electrical is, how old the roofs are. How old the plumbing is, things like that, to see whether it's worth the risk of underwriting a policy. So if you're looking at a home that hasn't been updated in a while, you need to be working with someone who knows what things to look for that are red flags for insurers. You need to be doing diligence upfront with a bunch of different insurers to see who is willing to write a policy. And you need to do that before making an offer, because if— especially if you're getting a loan, if you end up not being able to get insurance, you're not going to be able to get a loan. Lenders require insurance be in place. So if you can't get insurance, it means you're not getting this house. And while that's not necessarily an issue for people who are buying cash, people with cash obviously want insurance for their home. I had clients that were interested in a house that was over 100 years old, had really outdated electrical. We had to reach out to 7 different insurance brokers to find one who could find a carrier that would underwrite a policy for the house. So we really had to do our diligence there. And what's really crazy is that a few weeks later, I had another client looking at a house similar age and reached out to that same carrier, they weren't underwriting policies anymore. Their rules had changed in just a few weeks. So you constantly need to be doing your diligence. It is a really difficult market to navigate. You just need to be on top of it. You need to know what you're looking for and you need to be proactive about reaching out, making sure you can get coverage. And you need to be doing that really quickly because as I said before, homes are selling really fast. Market dynamics are constantly changing. So if you want to stay up to date about what's going on, subscribe to my channel. Go check out my Instagram and my TikTok. Join my mailing list. I create all different types of content about what's going on in the market so you don't have to research that stuff on your own. And if you're thinking about relocating and having trouble figuring out what the right neighborhoods are for you, I've made videos for both San Francisco and Marin County where I ranked in tiers a bunch of popular and some less popular neighborhoods so you can figure out how these places stack up against each other. I'll link those at the top of the description below. Go check them out. And as always, if you have more specific questions about the market, definitely reach out to me. My contact info is in the description below. I moved to the Bay Area over a decade ago without not knowing that much about the area, so know how scary that can be. Feel free to use me as a resource. I'd be happy to help. I hope you enjoyed the video, and I'll see you in the next one.