Those kind of hot markets are fraught with risks for the buyers. Often the sellers will demand that there is no inspection, no contingencies, so basically you’re buying it ‘as is.’ That’s on top of the premium over list price and the bidding wars.
i can’t talk about this year but most of the places last year in SF or the south bay were priced well below market. So… Of course the winning bid was going to be above asking. Both my daughter and my niece paid well over the asking price. My daughter paid over 20 percent more than the asking price. I think my niece paid over 30 percent over the asking price.
The prices they paid were maybe a little over market. A couple of percent…maybe.
One thing and I looked at were sales prices in the community for the last 2 years. I looked at the average price increases for the last two years. Redfin and trulia had these numbers. I came up with a range of prices that I thought were correct for the house. Without my knowledge, my son in law’s father did his own analysis. He came up with a price. His price was in my range. Then the real estate broker came up with a price at the top of my range. My daughter bid $5,000 over my range to make sure she got the place. There were 31 bids if I remember correctly. 4 were competitive. My daughter got the place.
The place is great for now. One thing that bothers me is young people are buying places and they are subjectively too small to raise a family. So…they are going to have to sell and buy again in several years. Moving and selling and buying can be costly.
I, too, am concerned about buying something smaller than a two bedroom. At least then you can get a roommate if needed, or put two kids in it, or let me come visit. 
I think the market is too daunting for her to actually get into it at this point. And while the idea of tapping into older coworkers is a good one, she works for a start up and is one of the oldest there! I just think (and I think she really does too) that at 25 she should be a little more flexible with her investments. But she pays a ton of taxes so that interest deduction is very appealing. And she has no debts and lots of savings and some investments already.
@my3girls, yes. I have a hard time with the idea of buying something smaller than a 2 bedroom. Does she want to stay in the SF bay area?
She’s 25. Who knows? She likes it most of the time. But occasionally I hear about moving somewhere she can have horses and work remotely. If houses were only 2-3X her salary I’d say go for it, but at 6X and up. . . it seems crazy to me. But like I said, we have lived a modest life. I think we are actually “middle income” 
Maybe this will trickle down…
https://www.luxurydaily.com/new-york-real-estate-follows-nationwide-trend-as-growth-slows-report/