SAN FRANCISCO (KPIX 5) – With the ever-escalating Bay Area real estate regularly hitting new levels of insanity, the asking price in a recent San Francisco home purchase is downright outrageous.
Prices are crazy in the Bay Area with residential homes selling for seven-times higher than the national average with the average price of about $1.6 million.READ MORE: COVID: Bay Area Health Officials Say Some Areas Would Be Vulnerable To Omicron Variant; Holdouts Seek Vaccine
The house, located in the Pacific Heights neighborhood, just sold for $9.6 million.
That’s $1.6 million over the asking price.
The property tax alone is nearly double the median household income and far more than what most U.S. families make in a year.
Some say the reason for the trend may come down to bragging rights.
It’s a San Francisco dream house with five beds, six baths, amazing closets and a wine cellar. While it was originally listed for under $8 million, it had six offers and went for 20 percent over asking at $9.6 million just nine days after hitting the market.
Patrick Carlisle, the chief market analyst with Paragon Real Estate said the number was not surprising.
“No. No, actually in SF, the average house sells for 13 percent over asking,” said Carlisle.
He went on to say that over 80 percent of San Francisco homes sold for over asking this year.
And while $1.6 million over asking is a staggering dollar amount, percentage-wise, 20 percent is not that impressive.
The highest overbid so far this year was 76 percent over asking for a “fixer-upper” in the Ingleside.
In just the last 6 months more than 100 homes have gone for at least 40 percent over asking.READ MORE: Fantasy Football Start Or Sit Week 13: Elijah Mitchell Looks To Take Advantage Of Seahawks' Defense
Carlisle thinks he knows the reason why.
“I honestly believe it egregious underpricing,” said the realtor.
Carlisle explained that obviously a hot housing market, low inventory and a realtor’s ability to market and stage are factors, but the trend of over overbidding has a lot to do with realtors purposely underpricing.
“They do that because they want to create that bidding frenzy. And bragging rights,” said Carlisle.
The listing agent for this home tells KPIX 5 she purposely didn’t underprice the Pacific Heights home and doesn’t recommend it to her clients as a strategy.
Still, there is no question that the overbidding trend is leading to some staggering numbers.
Some might be wondering if the sky-high prices for Bay Area real estate will ever come down.
Carlisle believes it will.
Carlisle notes housing market upcycles typically last five to seven years. The Bay Area is now in the seventh year of the current upcycle.
And while Carlisle admitted it is impossible to predict when the cycle will turn, he said there’s one thing that all downturns have in common.
“It’s called irrational exuberance. People get to this belief that it’s never going to end,” explained Carlisle.
He says downturns are generally caused by national events: an oil price embargo in the 1970s and the savings and loan crisis in the 1980s.MORE NEWS: COVID: As Offices Sit Empty, Investors Bet Big On Strong Recovery For Downtown San Jose
And a shift doesn’t necessarily mean a crash. It could be stability or a small decline.