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Noe Valley House Prices Hit the Roof
By Pat Rose
In one of the strongest and most competitive real estate markets in years, Noe Valley has seen an explosion of people trying to buy homes in the neighborhood. In fact, a home-buying frenzy this spring sent bids as high as $100,000 over the seller's asking price.
"It's the most bizarre market I've seen in years," says Tom Norwick, a realtor at B.J. Droubi on 24th Street. "People would put their house on the market on a Tuesday, and before the following Sunday they'd have six to eight offers over asking."
The usual routine of offer-counteroffer has gone right out the window. "Buyers were told to come in aggressively with their first offer because there weren't going to be any counteroffers," Norwick says. "Some agents were telling buyers to bid up just to get the house."
He notes the average price of homes in Noe Valley has risen to about $480,000. Even so, buyer demand remains high as a major influx of professionals, flush with cash from Silicon Valley's computer industry, are snapping up property here.
According to the realtors, these buyers are migrating to the neighborhood because of its small-town charm and its proximity to Interstate 280. But people are also choosing Noe Valley over other parts of San Francisco -- because it's slightly more affordable.
Says Kathleen Taggart, a broker with TRI, "People who would have bought in Pacific Heights in the past can get more for their money here. They're also very attracted to the neighborhood and its sense of community.
"I've never seen this kind of competition," she continues. "I've actually had to pull clients out of a bidding war because they were getting `buried' in the property as the price went higher and higher."
In some situations, Taggart has advised clients not to bid at all. A three-bedroom Edwardian in the 3700 block of 22nd Street, which listed for $739,000 this spring, is a case in point. "I told my clients not to bid, because the price was too high," she says. The house sold within a week for $755,000.
In fact, 22nd Street has become a hotbed of activity. With its interesting mix of architecture -- including a charming row of John Anderson homes (a prominent turn-of-the-century carpenter) between Sanchez and Noe streets -- a peaceful lack of traffic, and terrific views, 22nd is one of the neighborhood's most desirable streets. Even houses in need of major renovation just to be livable -- properties that might not have sold in a softer market -- have been fetching buyers.
In the same block as the three-bedroom Edwardian sits a sad-looking Victorian in almost total disrepair. Though it was on the market for a year, the house, at 3766 22nd St., recently sold to a contractor for $261,000.
A block away at 3647, another Victorian that needed extensive work, due to an ill-conceived conversion from a family home to a two-unit building, just sold for $420,000.
How do the 22nd Street neighbors feel about all of this activity?
According to one neighbor, who preferred not to give his name, the response is mixed. "Renters are aghast because it just reinforces how unaffordable it is for them to buy. Some owners are thrilled because they think their houses are now worth three-quarters of a million dollars. The rest of us are simply in shock at how high the values have gone. It just doesn't seem real."
He points out that the buyer who paid $755,000 for the three-bedroom Edwardian is now spending even more money on an extensive remodeling job. Says another neighbor, "They might as well pick up the house and roll it over to Pacific Heights!"
In fact, buyers without deep pockets have been forced to buy in other neighborhoods.
"We felt Noe Valley was overpriced, and the only houses we could afford needed a lot of work," says Victoria Apple, who moved to the city recently from Novato with her husband. The Apples, who have always wanted to live in San Francisco, found a two-bedroom house with a formal dining room and small yard in Bernal Heights for just over $250,000. That was after putting in offers on three other houses, where bidding wars kept them out of the running. "The sellers would get multiple offers and counteroffers, which sent the prices up, and we would have to pull out," she explains.
Throughout the city, an extremely low inventory of available houses is fueling the higher-priced market. Some experts speculate that this is caused by homeowners waiting to see if Congress will reduce the capital gains tax before putting their homes on the market. Others say the "move-up market," the trend of buying larger and more expensive houses as a family's income expands, has stalled.
"I think the recession made people more cautious," says realtor Sue Bowie of Mason McDuffie. "People don't feel as secure in their jobs and don't want to take on a huge debt load."
Bowie also points out that the new way to "move up" is to add on. "Many people who need more space, but can't afford a bigger house in the neighborhood, are simply adding extra rooms onto their existing homes."
But for those who are still trying to buy in this tight market, there are certain tactics that will help.
Getting preapproved for a loan, eliminating inspection contingencies before making an offer, agreeing to close escrow quickly, or having other kinds of flexibility can help buyers stay competitive, advises Bowie.
Being realistic about what you can afford is also critical, says Norwick. "Some people get so eager in these fast-moving multiple-offer situations, that they bid up a property and wind up overextending themselves. I tell buyers to think in terms of a five-year plan. If they can't stay in the property that long, I can't guarantee they'll get their equity out of the house."
Remember that some buyers who have bid their way to first place may realize they have acted too hastily and pull out of the deal. "The highest bidder does not always walk away with the property," notes Ilse Cordoni, a broker with Zephyr Realty.
Cordoni counsels buyers to go ahead and get in a back-up position if they real-ly want a property. For example, Zephyr listed a house on Douglass between 24th and Jersey for $529,000. An offer of $590,000 was accepted, but the buyers had second thoughts and backed out. A back-up offer of $552,000 was accepted.
Will the bidding wars continue?
"I think the summer will create a pause in the market, at least enough so that buyers have a little more time to think about what they're seeing," says Norwick.
But Cordoni says, "There still seems to be a backlog of frustrated buyers out there. The bidding wars may be over, but there will continue to be multiple offers on prime properties."
Editor's note: The Voice will cover this story from the renters' perspective in an upcoming issue.