Home Truths, a quarterly report on the state of the Berkeley real estate market, is brought to you by Red Oak Realty.
The East Bay has perhaps the most unusual real estate pricing culture of any market in the San Francisco Bay Area.
To fully understand East Bay home prices — and to participate in the market effectively — you’ll need to understand the unique way real estate agents and sellers price their homes here.
Inner East Bay listing agents (as they advise their homeowners) routinely list the homes they represent at from 10 to 20 percent below the actual price they expect the home will fetch. Yes, you read that correctly.
For example, in the first half of 2019, Berkeley single-family homes went for an average of 19 percent over list price, the highest percentage list price of any Bay Area city that quarter, according to MLS data analyzed by Red Oak Realty. Three Inner East Bay cities followed: El Cerrito (17 percent), Albany (15 percent) and Kensington (13 percent).
The Inner East Bay has the highest concentration of homes that sell for the highest over list price. Red denotes areas with higher sale-to-list-price ratios. Source: Red Oak Realty analysis of MLS data.
This over-list-price trend has been happening in the Inner East Bay (the East Bay stretching from Richmond to San Leandro west of the East Bay hills) for decades. Homes have been listed under their expected price for so long that the practice is now fully baked into the real estate culture here.
Why? There’s no good answer, but the practice does have its logic.
With more attractive prices, properties attract attention from more buyers, and the likelihood of a bidding war goes up. Playing with the rules of supply and demand, this pricing strategy posits that popularity breeds increased demand and competition, which helps sellers get top dollar.
The catch is that all experienced East Bay buyer’s agents know this tradition well. If their buyer really wants a home, they’ll advise entering an over-list price-offer because they know how the market works.
It’s debatable whether this leads to higher prices for sellers, because it has become such a standard, widespread and anticipated practice.
Assessing the list-to-sale price metric
Skilled local agents know the trajectory and size of the over-list-price trend. The area’s average over-list price percentage can range from closer to 10 percent to 20 percent and above; it also varies depending on a neighborhood’s relative popularity at any given time.
Currently, East Bay sellers are listing homes closer to expected sales price than in recent years. We think this started when a flood of inventory hit the market in fall 2018 and continues to influence seller strategy.Want an expert pricing opinion on your home or a home you’re looking to buy? Reach out to us; we’ll help you price homes accurately with our deep, nuanced knowledge of our Inner East Bay home.
Home Truths is written and sponsored by Red Oak Realty, the largest independent real estate broker in the East Bay, serving the community since 1976. Read more in this series. If you are interested in learning more about the local real estate market or are considering buying or selling a home, contact Red Oak at hello@redoakrealty.com, 510-250 8780.
