The San Francisco Bay Area, known for its thriving tech industry and gorgeous scenery, is also home to the most puzzling real estate market in the country. The region already had a notoriously low housing inventory, but it was further complicated by the recent pandemic. As a result, competition grew fiercer and prices grew higher, making it hard to find a suitable home.
That said, a low-inventory housing market shouldn’t deter you from fulfilling your real estate goals. Continue reading to learn how to navigate this landscape.
LOW HOUSING INVENTORY EXPLAINED
Low housing inventory refers to the situation when the number of available homes for sale fails to meet market demand. As a consequence, home prices increase and homebuyers have limited housing options. Sometimes, this forces buyers to settle for less desirable properties.
What caused it?
The Bay Area’s housing inventory problem is complex, caused by a combination of factors.
One of these reasons is the rapid growth of the region’s tech industry. The success of companies like Google and Twitter attracted droves of highly paid employees, many of whom were young and single. This led to an even greater demand for smaller housing options in the Bay Area’s urban centers.
Geographic constraints also play a major role. The Bay Area is bordered by water on three sides, limiting available land for development. Many parts of the region are also protected open spaces or designated for agricultural use.
Will it lead to a seller’s market?
The Bay Area is already in one. In this type of market, sellers have the upper hand since there are more interested buyers than there are available properties. In addition to getting higher asking prices, they also benefit from faster sales.
NAVIGATING A LOW INVENTORY MARKET
While it can be difficult to find a suitable home in the Bay Area, it’s not an impossible task. By following effective strategies and expanding your search, you’ll find your dream home or ideal investment property for the right price.
To make things easier, let’s take a deeper look at how you can navigate its housing conundrum effectively.
Look for off-market properties
Many homebuyers spend most of their time on the MLS (Multiple Listing Services) because they think it’s the only place to find listings. This can be a big mistake when there’s a low housing inventory since it’ll usually lead to wasted effort. To curb this, savvy investors and seasoned homebuyers take an alternative route. Many of them fall back to doing off-market transactions since there are more options and chances to get better deals.
What are off-market properties?
In most cases, off-market properties are homes that aren’t publicly advertised and listed anywhere. Sellers often choose this route because they’re high-profile individuals or they’re selling for sensitive reasons. Sharing the listing with a smaller number of potential buyers helps them avoid fraudulent and bogus investors.
How to find off-market properties?
While looking for off-market properties can be daunting, it’s not difficult if you know what to do. Here are effective strategies real estate investors use:
- Network with fellow investors. Networking with fellow investors is an effective lead-generation strategy in the real estate world, which still holds with off-market properties. Like real estate agents, investors are immersed in the local markets and know where to find the best deals. If they know what you’re looking for, they might throw a promising prospect your way.
To build a larger network, attend real estate events in and around your area. This may include trade shows and educational seminars. Networking gets easier with practice, so don’t be afraid to put yourself out there. Striking up a conversation with a random real estate investor or agent might lead you to a lucrative investment opportunity.
- Talk to builders and contractors. Builders and contractors are great friends to have during this endeavor; they also work with homeowners looking to fix up their homes before putting them up for sale. If you happen to know the person working on the house, they can share this information with you, giving you the chance to get in touch with the seller earlier.
- Check real estate auctions. Many savvy investors like to attend property auctions since they provide a steady stream of off-market real estate options. Homes are auctioned off for various reasons, but it’s usually because they’re in foreclosure or they passed through probate.
If you find a property you like, thoroughly research the property, its specs, and the neighborhood it’s on to make sure that it suits your needs. Once you’re ready, confirm bidding procedures and set a budget. This will help you stay focused and prevent you from overspending on a house.
- Employ direct marketing campaigns. Sometimes owners don’t know they’re ready to sell until they’re presented with an offer. This is why direct marketing is an effective approach to uncovering off-market opportunities. It usually involves directly mailing or messaging a homeowner and expressing your interest in buying their home. Check county records to find their mailing address and other means to get in touch with them.
- Work with local real estate agents. Real estate agents are all about networking, making them perfectly positioned to help you find off-market deals. While they’re more familiar with properties on MLS, they also have non-listed homes which they reserve for highly qualified buyers. These are often called “pocket listings”, or properties that they have the exclusive right to sell.
Consider new construction homes
A low housing inventory often lacks good homes for sale. Attractive new listings are almost always swept up immediately by other buyers. By the time you find a property you like, the seller already has multiple offers. This can be discouraging, especially if you have a strong desire to be a homeowner.
If you do find a property that’s still up for grabs, it usually doesn’t have the best features, condition, and location. Although you can always remodel and renovate, they’re just additional expenses on top of what you’ll pay for. Meanwhile, if you have the patience, a new construction home can be a better option. It offers several benefits including:
- Less competition. New construction homes have less competition because the properties being sold don’t exist yet. This turns other homebuyers who are looking for move-in-ready houses due to a tight deadline away. Less competition means you won’t be forced to deal with bidding wars and waive contingencies like home inspections just to make your offer stand out.
New construction homes also have a set price, whatever your budget may be. This eliminates the concerns over an appraisal gap, where homebuyers will have to pay for any difference between the price and appraised value of a resale property.
- Better Design. When you purchase a new construction home, you’ll get exactly what you want. Since you’ll be a part of the construction and design process for the most part, you can adjust your home to suit your lifestyle and not the other way around. There’s no need to settle for a property that doesn’t have that feature or extra room you need.
Even with a semi-custom build, you’ll get far greater control than with resale homes. Builders offer base models that come with a suite of customization options. You can have extra rooms constructed, custom storage installed, and even premium tiles added. Talk to your builder to have everything sorted out.
- Modern features. One of the most exciting aspects of new homes being built today isn’t just the property itself, but the features they come with. They’re often equipped with top-of-the-line smart features designed to make your everyday life as easy as it can be. This can include automated security systems, smart lighting, etc.
The integration of modern technologies comes with the added benefit of energy efficiency. The latest technology in insulation, windows, and other construction materials is designed to reduce energy consumption, helping you lower your utility expenses.
- Lower maintenance costs. Aligned with current building codes and policies, newly built homes are constructed to require less maintenance. With less to worry about, you can spend more time enjoying your home and the community around rather than conducting repairs and dealing with out-of-pocket expenses.
Furthermore, just like when you buy a new phone or car, new construction homes come with builder’s warranties. This would typically cover repairs and other issues for the first couple of years. And since you’ll likely work with local builders, they’ll be able to resolve any problems that come up immediately.
- Great Location. When builders look for lots for new construction homes, they consider the location and how much it can offer its residents. You’ll typically find them in well-planned communities boasting a wealth of amenities such as pools, walking trails, parks, shopping centers, and more.
Being in a place where people want to live plays a huge role in determining a property’s real estate value. So aside from the bonus of having impressive neighborhood amenities, new construction homes also present lucrative resale opportunities.
Expand your search to nearby areas
Another way to increase your chances of finding a home when there’s a low housing inventory is by expanding your search to nearby areas. Broadening your options will make it easier to find a home that suits your needs and budget. It’s also a great chance to discover a hidden gem that might have otherwise flown under your radar.
East Bay has a collection of equally impressive cities that have distinct charms and fantastic offerings of their own, including the following communities.
- Danville. Danville is a charming and posh community bounded by meandering creeks and deep-rooted oak trees. Many consider it a gem in the Bay Area, no doubt because of its tranquility and accessibility. While it’s conveniently located near San Francisco and San Jose, it still maintains its small-town feel.
Despite being called a town, it’s technically a city. It has a vibrant downtown filled with modern conveniences, such as upscale shopping centers and an assortment of locally owned restaurants, mom-and-pop shops, and boutique stores. Danville is also home to some of the best schools in the state, making it an ideal place for growing families.
Danville’s real estate market is one of the most robust in the Bay Area and offers a wide range of housing options. The town’s neighborhoods are characterized by spacious single-family homes and well-manicured lawns. Its countryside has a fine selection of ranches and luxury estates that offer a serene retreat. The median house price in Danville is around $1.9 million.
- San Ramon. An eight-minute drive south of Danville lies San Ramon, an affluent East Bay city known for its top-notch amenities and beautiful scenery. Surrounded by rolling hills, numerous parks, and extensive trails, it’s a nature lover’s paradise. And with pleasant year-round weather, it lends itself to various outdoor activities such as hiking and camping. The most notable destinations include Mount Diablo and the Las Trampas Regional Wilderness.
Beyond amenities and recreational areas, San Ramon has features that make it an ideal place to thrive. The city has a robust economy and is home to some of the country’s leading companies including Chevron and AT&T. It also has a highly rated public school system that continues to receive generous funding.
San Ramon has a diverse real estate market. From condos and apartments to single-family homes and luxury estates, there’s a wide array of options to choose from. Currently, the median home price in the area is $1.4 million.
- Alamo. Alamo is an idyllic enclave situated north of Danville. One of the first things you’ll notice here is how it strikes the perfect balance between upscale sophistication and rural charm. Embraced by Contra Costa’s enchanting landscapes, it provides a reprieve from the hustle and bustle of the surrounding cities and invites residents to rediscover life’s simple pleasures.
What Alamo lacks in size is made up for in amenities and recreational opportunities. From amazing dining destinations and boutique shopping options to lush parks and scenic nature trails, you’ll be hard-pressed to find enough time to visit and experience everything Alamo has to offer.
Spacious single-family homes dominate the housing stock, many of which sit on half-acre lots that enjoy views of Mt. Diablo. Some of its most notable communities include Alamo Springs, Stonegate, and White Gate. The median listing home price in Alamo is $2.9 million.
- Pleasanton. Pleasanton is a multifaceted city that attracts homebuyers from various backgrounds. Whether it’s for the rich history, vibrant downtown, or eclectic arts scene, Pleasanton has something for almost every lifestyle. And like the rest of its neighbors, it also has amazing family-friendly attractions that showcase the Bay Area’s natural beauty.
What makes Pleasanton unique is its continuous efforts to create opportunities for healthy and sustainable modes of transportation. With an impressive network of bike lanes, shared roads, and off-road trails, it’s a haven for cyclists and one of the most bike-friendly communities in the region.
Pleasanton is known for its historic charm, which is reflected in its heritage architecture and its neighborhoods. The single-family homes in the area were built between 1940 -1960, but all of them are well-maintained if not fully updated with modern features. They also sit on large lots ranging from half-acre to two-hundred-acre properties. According to Realtor.com, the average home price in the area is $1.5 million.
- Dublin. Dublin has been in the limelight throughout these past few years for being one of the fastest-growing cities in California. It’s conveniently located in the heart of the Tri-Valley area, where residents are treated with a healthy mix of suburban tranquility and big-city energy. Along with an eclectic food scene, living here gives you easy access and endless opportunities for outdoor adventure. It enjoys proximity to San Francisco, so a trip to the city for work will always be an easy trek.
Dublin takes pride in its Irish roots, which are constantly on display in the form of various adornments scattered throughout the area. This culminates every year with the celebration of St. Patrick’s Day. It’s a two-day festival celebrating the city’s Celtic heritage, delicious food, and award-winning wine selection.
The majority of the housing stock in Dublin is composed of single-family homes, but you can also find townhomes and condos. For those looking for more privacy and luxury, Dublin also offers several gated and master-planned communities.
OVERCOME LOW INVENTORIES WITH A TOP EAST BAY REALTOR
With a knowledgeable Realtor by your side, anything is possible in the Bay Area. Further explore your real estate opportunities in the East Bay with me, Kimberly Ghazivini. Recognized as the Top Producer in the East Bay for 2021 and 2022 by Golden Gate Sotheby’s International Realty, you’re in capable hands.