When the Silicon Valley real estate market gets into an overheated mode, like it is today, it creates strong emotional fallout on home buyers, some of whom have been dabbling with the idea of buying a home for a very long time – and they are just now coming to grips with the fact that the tables have been fully turned on them from the deep buyer’s market of 2010 and the year or two before.
Some buyers are getting angry about the overbids that go 25% over list price and up. Others are sad, feel depressed that they “missed the market” opportunity of 12 or 18 months ago. And others have a sense of hopelessness or “why bother”. Fear is also prevalent: “if I buy now, will it crash again tomorrow, or next week, or next year?”
Right now, the comps don’t count. What counts is competition. The homes getting the most offers are selling so stratospherically high that they are most unlikely to appraise to sales price. That creates anxiety for multiple reasons.
Recently I spoke to a buyer about the market heat here in the San Jose area, and my concern for them economically with the bunches of bids that some properties are getting. She replied that if lots of people want that house, it bolsters the idea that the property will likely be desirable on a more normal market too, whereas a house or condo with few offers causes a loss of confidence.
Why should a buyer bother now? That’s a personal question. The numbers may not add up to the kind of sensible math you’d normally like to see. But if you are buying a home for the long run – that is, you expect to be there 10 years or more – it may still make sense to purchase even if you have to fight hard and take some risks to be the winning bid. Most of the time, that winning bid is the one where the most risk is taken. That’s pretty scary right now.
Interestingly, the same emotions are at the forefront when it’s a declining market and home buyers buy anyway. Why do they do that? It’s not about the money, it is about getting on with their life.