Editor’s note: Jon Sterling has been in the real estate business since 2002. Follow him on Twitter @mistersterling.
Have you been searching for a place to live in San Francisco lately? You’re not the only one thinking @$#%&! on a daily basis.
Forget the speculation about a tech bubble. This is a real estate bubble.
It’s a common scene on a weekend morning: A line of people waiting for an open house at an apartment that just hit the market, with rental applications, credit reports, and certified checks in-hand. The first one who qualifies wins the prize.
SOMA condos under $600,000 (now considered “entry level”) are going under contract in a matter of days, often with multiple offers. So far in 2012, the median market time for sold condos in SOMA is 42 days. That’s 42 days from the time it goes for sale to the time the title changes hands. In the past month, that number has dropped to 34 days. When it comes to real estate transactions, 34 days is fast. Very fast.
I have a client who wanted to see two condos that hit the market last week ($589,000 and $599,000). Both were under contract before we had a chance to see them, and both had multiple offers.
New tech jobs are increasing the housing demand and causing pain for buyer and renters, but that’s not the only way technology companies are adding to the Silicon Valley housing woes. The success of short-term rental companies like Airbnb and HomeAway are contributing to the lack of inventory as well.
The short-term rental companies have provided liquidity for homeowners and renters by making it convenient for them to rent out rooms, apartments, and entire houses. Owners and renters are now able to subsidize some (or all) of their monthly payments, which limits the number of units on the market. If a tenant loses his job, he can rent his bedroom and sleep on the couch to generate some cash. If a condo owner quits her corporate gig to launch a startup, she can stay with friends for the weekend while visitors rent her place. A few years ago, those units would have gone on the market out of necessity. Today, the classic illiquid asset — real estate — has a new kind of liquidity.
The San Francisco Business Times reported that 8,000 new tech jobs are expected to be created in San Francisco this year. That much job growth is great news for the local economy, landlords, and home sellers, and will have a positive trickle-down effect.
At the same time, that is very bad news for renters and buyers. Many of the new jobs will be filled by people who already live and work in tech in San Francisco, so 8,000 new jobs does not necessarily mean 8,000 new residents. Nonetheless, aggressive hiring by tech firms is contributing to the housing scarcity. The war for engineering talent has expanded across the country, and often includes hefty relocation packages.
So what should you do?
If you are a renter, use your network — Facebook, Twitter, Path, co-workers, and anyone else who is connected in San Francisco. If you can nab a place before anybody else knows about it, you win. Also, walk the neighborhoods where you’d like to live and look for “For Rent” signs in windows. Not all landlords use Craigslist. Have a current copy of your credit report handy and move quickly when you find a place that might work.
If you are a buyer, find a great advisor. Most of the time that will be a real estate agent, but it doesn’t have to be. A great real estate agent will bring your properties as soon as they hit the market, and maybe even before they hit the market, in addition to helping you navigate the home buying process. Also, be smart about your bidding strategy. This is not a market where low-ball offers are going to work.
If you are a seller, thank your lucky stars. Most sellers in the country are not as fortunate as you. Just don’t gloat, okay?
If you are lucky enough to have an awesome place at a decent price, do your best to lock-in your current rental rates for as long as you can stomach it. You may be able to negotiate with your landlord if you’re willing to sign an extended lease. Try something like, “I will commit to this apartment for the next three years if you will commit to the current monthly rental rate for the next three years.”
If you are a landlord, make hay while the sun shines. Rainy days will be upon us again. We will remember the landlords who treated us well, and those who didn’t. And even if we forget, the Internet doesn’t.
[photo via flickr/J_P_D]