32 Offers — Are We in a Bubble?

22nd 225x300 32 Offers    Are We in a Bubble?

We get asked almost every day whether we think a bubble is forming around social media companies like Facebook, Twitter and Zynga. And with Facebook buying Instagram this week for $1 billion, “bubble” is now on the tip of everyone’s tongue.

They say you can see a bubble if you look at the real estate markets. So here is a bit of color from the Inner Mission, one of the neighborhoods popular with programmers, developers and other young professionals driving the latest iteration what-may-soon-be-a-bubble.

Listed as a fixer upper, this property received 32 offers after 9 days on the market. No typo, 32 offers.

We’ll see where it sells, but needless to say there is a lot of money out there chasing development opportunities in San Francisco’s south side.

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About Andrew Jeffery

Andrew is Co-Founder and Chairman of Cirios. Prior to founding Cirios, Andrew worked for seven years in New York in the mortgage finance business, managing a $500 million lending facility at The Winter Group, a mortgage investment company. Andrew is a published author, whose work has appeared in the Wall Street Journal, Bloomberg, Minyanville and HousingWire.Andrew is responsible for managing the Cirios investment portfolio.Andrew holds a degree in Economics from UC San Diego and is an avid trail runner.


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15 thoughts on “32 Offers — Are We in a Bubble?

  1. Tom Stone

    Wow. Not seeing that here, not that many offers. I wrote up 11571 Green Valley Rd a while back, it had 5 offers, two all cash and sold in less than 10 days. 11160 occidental Rd went on the market last thursday and went into escrow today with an all cash offer 10% above asking. Still a nice deal. And Juanita Ct took 4 days to sell at asking price,all cash. They go very quickly now if they are priced right. Today’s broker’s tour had 5 properties to see, one is in escrow,another came on the market monday and is priced well enough it should sell quickly and three had completely unrealistic prices.

  2. mikewilliamsenmikewilliamsen

    It all boils down to price point. Simple. Buyers will bid a property up to the price point. Pricing them very low to get many offers, is lazy and sloppy by the listing agent, and just wastes a lot of agents’ and buyers’ time. Do agents really need to do this to each other?

  3. Steve

    Waiting for the market to heat up in Sacramento County. We are seeing a lot of cash buyers from the Bay area, since we do have a strong rental market.

  4. Andrew Jeffery Post author

    Part of the reason for rising prices in certain area is definitely lack of inventory — simple supply and demand. This particular property is in one of the most desirable yet affordable parts of San Francisco and was priced very low.

  5. Greg FieldingGreg Fielding

    “Rules of bubble.
    1. Bubbles can’t be reflated.
    2. You dont see another bubble in same asset class within same generation.”

    Why not? Even if you can prove that these things have never happened before, that is no reason why they couldn’t happen now.

    And, by arguing that this isn’t a bubble, is it your opinion that this feeding-frenzy is just a normal market?

  6. Andrew Jeffery Post author

    One argument for why there may not be a bubble (yet) is that you have so many people worrying about and talking about whether or not there is a bubble. Once the boom has been going on long enough to convince even the naysayers that this time it really is different, then you know you’re in a bubble.

    The 32 offers in this situation is a function of 3 things:
    1) Very limited inventory, so every single buyer of this type of project is starving to put money to work.
    2) Crazy low list price.
    3) Ideal market for the finished product since this is one of the top few neighborhoods for the very narrow group of people getting rich right now.

    In addition, the social media boom has transpired against the backdrop of a terrible economy and generally terrible housing market. That tells me there is some fundamental growth behind the story, something that would have been quashed by the lousy economy were it truly fluff.

    Gun to my head, we are way too early into the cycle, with way too many pessimists to be in a truly dangerous bubble … yet.

  7. Michael Kestrel

    The bubble is in the stupid dot coms, apple, facebook. Money from those is moving into real estate. The bay area has been insulated from the real depth of the bubble. If there are still multiple bids a year from now i will admit I was wrong.

  8. Tom Stone

    Mike Kestrel, PARTS of the Bay Area have been insulated. Take a look at Solano County or large parts of Alameda and Contra Costa Counties, Sonoma as well. Heck, even the northern parts of Marin have taken a hit. 9 Counties, lots of markets.

  9. Michael Kestrel

    Tom,

    The fortress penninsula has been sheltered. Thats what I was referring to, you are correct. However, the prices in many east bay neighborhoods I live in are still inflated despite the reduction. There are still many areas in the penninsula with multiple bids over asking price. I agree with Greg that distortions can exist in the market creating a semblance of the reinflation of the bubble. Its not over yet.

  10. Tom Stone

    Mike, it is very much a local phenomenon. Piedmont and montclair are still high as is the peninsula. The increasing disparity in the distribution of wealth accounts for some of this, but not all. I can say that I see fine properties here in Sonoma County priced well below what it would cost to duplicate them.

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