This fall’s real estate data confirmed what attentive locals have been sensing for a while: that the market is on a high. The average home price in San Francisco was up 9.2 percent over 2011, and home sales increased by around 14 percent Bay Area–wide. But not everyone in the housing market has cause for celebration. High-end and all-cash buyers are welcome guests at the party. But if you’re a move-up or mid-range buyer, or a first-time buyer without resources for a significant down payment—well, your invitation got lost in the mail.
Move-up buyers are particularly hamstrung. Even though values are up this year, they’re still just below where they were right before the crash in September 2008. (Remember, the pre-crash market had been recording annual increases near or at double digits.) So homeowners who bought between mid-2006 and mid-2008 probably still don’t have enough equity to sell their home and buy something else. And good luck getting a loan in this still-tight mortgage market.
Even those lucky enough to have a healthy down payment and qualify for a mortgage aren’t guaranteed passage through the velvet ropes. Say you’re a tech industry veteran who sold his first company and is working on his second, a Hong Kong resident who does business in San Francisco, or a young software engineer at a startup who unloaded her pre-IPO options on the private market. You can enter this competitive real estate market with an all-cash offer, and homes are yours for the taking. But if you’re someone without deep pockets who’s trying to buy a house the old-fashioned way, you’re pretty much screwed. “If there’s a choice between a buyer with a substantial down payment and a cash buyer, the cash buyer will almost always win,” says Bobbi Decker, the National Association of Realtors director for San Mateo County.
The only hope for the rest of us is that the current housing inventory crunch will eventually abate. (In July, the available inventory in the Bay Area was down 57 percent from the previous year.) But in order for that to happen, prices will have to rise enough to allow all those stuck move-up buyers to put their homes on the market. Oh, and loan restrictions will have to ease up, and all-cash buyers will have to find somewhere else to put their bags of money. In the meantime, the party inside is rocking—if you can get past the bouncer.
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