For the last two months, as the stock market has been sliding, it seems as if the number of buyers in San Francisco has been slowly dropping off as well.  We have always had a way of measuring supply—the number of listings in the Multiple Listing Service (MLS).  But we have never had a way of measuring demand.  Sure, we have anecdotal ways of estimating demand.  When the market was hot, we could count the number of buyers who requested a disclosure package for a property.  And then we could count the number of offers, and watch how far over the asking price the successful bidder was willing to pay.

Today’s anecdotes are a bit different.  I have been comparing notes with other agents.  It seems like we have all lost buyers in the last few weeks.  Some were motivated buyers, but had forgotten to liquidate the portion of their stock portfolios that would be used as the down-payment for their home.  Now, a large chunk of that money is gone, and so are these buyers for a while.  Other buyers have found that loan programs have changed, diminishing their buying power to a level that they are not excited about (e..g. Some loans that were interest only for five years that had payments significantly lower than fully amortized loans.  These made sense for clients where one member of a couple was taking time out of the workforce while the kids were young, with the expectation of returning to the workforce within a few years.  These loans often made home ownership more affordable on one salary).  Other buyers have lost their jobs with the recent wave of layoffs in bay area companies.

The result?  We have significantly fewer buyers in the market.  Many of these buyers have made offers on properties that are significantly lower than recent values on homes and condos.  And, guess what?  Many of these offers have been accepted.  I have a few clients in escrow to purchase homes, and they all feel that they are purchasing at exceptional prices.  For some sellers, those who really want to sell (job change, family change, retiring, etc), and particularly for those who have owned their homes for a long time, it is a no-brainer to accept an offer or negotiate with a buyer to get the deal done.   Many of the deals that are currently in escrow are likely to bring prices in San Francisco down.  (and of course, the neighborhoods that are the most desirable are most likely to hold their values, and the ones that are least desirable will see bigger declines).

It’s a great time to buy a home or condo in San Francisco.  And for Sellers, the good news is that there are still Buyers and homes are selling.  These Buyers have more power, and their expectations are a bit more rigorous.  They DO want great homes (and condos), in excellent condition, in desirable locations, and of course, priced well.