‘Just mind-blowing’: Despite fires and virus, Bay Area home prices hit record

Neither the coronavirus nor the wildfires put much of a damper on Bay Area real estate in August, as the median price of an existing single-family home hit a record high of $1,068,000, according to a California Association of Realtors report issued Thursday.

The median price rose 1.7% from July (which tied a previous record) and a robust 18.7% from August of last year. The number of homes sold in August was up 10.8% from last August but down 6.3% from July. The report excludes condominiums, newly constructed homes and properties not advertised on a Multiple Listing Service.

Sales are a lagging indicator because it typically takes about a month for deals to close. Last month’s sales and prices mostly reflect deals that were entered into before major wildfires broke out in and around the Bay Area on Aug. 17 and 18. For a more up-to-date picture, experts look at the number of sellers accepting offers each week. That data suggest the fires did dampen activity, but only for about two weeks, and mostly in areas closest to the fires.

Between the first and second half of August, the number of listings going into contract declined only 3% in the nine Bay Area counties plus Santa Cruz and Monterey counties. Four counties, however, saw double-digit declines — Santa Cruz (29%), Sonoma (18%), Monterey (11%) and Napa (10%), according to Patrick Carlisle, chief market analyst with the Compass real estate firm.

By the first two weeks of September, however, the number of sellers accepting offers across the region was essentially back to where it was in the first two weeks of August.

“When the fires broke out because of the lightning strikes, our market took a dip, it was off for probably two weeks,” said Rick Laws, a regional vice president with Compass in Santa Rosa. But then the number of homes going into contract in Sonoma County rebounded. “That surprised me. I didn’t think people would say, ‘Let’s come up and look at properties’ (when) you can’t even see the properties.”

Meanwhile, a profound shift in the market that started in June, after the Bay Area climbed out of a major downturn in April and May, continued into August. Buyers gravitated away from San Francisco, particularly high-rise condos, in search of larger homes with more land, especially in Marin, Sonoma and Napa counties.

Santa Cruz and Monterey counties have also seen an influx of buyers from Silicon Valley looking for a more rural lifestyle and somewhat cheaper homes, said Morgan Lukina, president of the Santa Cruz County Association of Realtors. The market will become more challenging, since the CZU fires destroyed 925 homes, mostly in Santa Cruz County. “Those were some of our most affordable homes,” she added.

The shifts in demand are a direct result of the pandemic. As people become less tethered to their offices and schools, they want more space for work and play. Unable to travel, many people who have the means are buying second homes with pools in resort-like areas.

“Expensive second homes are very much in demand, usually in less populated areas (of Sonoma County) like Healdsburg, Sebastopol and the Sonoma Valley,” Laws said.

The same thing is happening in other markets such as Lake Tahoe, Aspen, Colo., and the Hamptons in New York, said Maurice Tegelaar, a Compass agent in Sonoma.

The only Bay Area market that saw a decline in luxury-home sales between this summer and last summer was luxury San Francisco condos, where sales were down 19%. Luxury home sales were up 176% in Sonoma County, 116% in Contra Costa, and 109% in Marin, according to Carlisle.

 ‘Just mind blowing’: Despite fires and virus, Bay Area home prices hit record

The median price is the point where half of homes sold for more and half for less. Median prices can go up because homes in general are appreciating, because there has been a shift in sales from lower-priced to higher-priced homes, or both.

On a year-over-year basis, median prices were up in every Bay Area county last month. The strongest were Napa and Marin, where median prices were up 24% and 23%, respectively, and sales were up 52.2% and 37.8%.

In San Francisco, sales were up 28.9% and prices were up 3.8%, but remember this report excludes condominiums, which make up a much larger percentage of sales in San Francisco than other counties and are much weaker than single-family homes.

“The condo segment is by far the weakest in the Bay Area, and within the condo market, the weakest is South of Market and the Van Ness, Market Street corridor,” Carlisle said. Condos in some areas, such as Noe Valley and Eureka Valley, that have a lot of two- and three-unit buildings with decks or a yard, are holding up. “Where the condo market has really been hammered is the high-rises” with no separate entrance or private outside space, he said.

The number of active listings with a price cut in San Francisco has soared in recent months, from 148 in May to 428 in August. About 78% of the price cuts were on condos, the rest on single-family homes. The number of San Francisco condos for sale is the highest in at least 10 years. That “should put downward pressure on condo prices, but it’s not showing up in any drastic form yet,” Carlisle said.

On new condos, developers are slow to cut prices, preferring to offer incentives such as upgraded finishes or six months of homeowners association dues.

Millennials Ally Sillins and her husband, Santosh Vadlamani, found the San Francisco market to be quite competitive, at least in their target areas. Both work for a large technology company in Silicon Valley, but the pandemic and their ability to work from home, perhaps for an extended period, didn’t affect their decision to buy in San Francisco. Many of their friends working in technology have fled the city, but “I genuinely love San Francisco,” Sillins said. Growing up in Atlanta, she used to visit an aunt and cousin in San Francisco “and I thought they were so cool. I thought San Francisco was this dream.”

They made their first offer in May, on a tenants-in-common unit in Duboce Triangle. It had three offers and the winning bid was $200,000 over the asking price. In June, they bid on a TIC unit North of the Panhandle. “It had nine offers, ours was the lowest and we put in $50,000 over asking,” she said. “It was just mind-blowing.”

Finally, their agent heard about a TIC unit in North Beach that was in contract but likely to fall through because of a loan issue. Before it went back on the market, they offered a little over asking. It was accepted, and they closed in late August. Their Telegraph Hill unit is one of four spread across two buildings. While much of downtown looks like a ghost town, “North Beach is happening now. People are probably having too much fun when they should be indoors,” Sillins said.

On the flip side, “just because a market is strong doesn’t mean people will buy anything,” Carlisle said. “In Wine Country, there is still a lot of inventory in the high end, although it’s selling three to four times faster” than last year.

Constance Kopriva just cut the price on an 18-acre property with a vintage four-bedroom farmhouse in Sonoma by $1 million, to $3.75 million. Kopriva, a mostly retired real estate agent, listed the property on Cassidy Ranch Road. She and her husband have owned it for almost 20 years but don’t live there currently. Their son makes wine, and they planned to plant vineyards and open a winery and tasting room on the property, but it took them four years to get the permit and now “we are having second and third thoughts,” she said.

The permit is good for two years, so they decided to list it for sale around Aug. 10. “Out-of-towners want luxury houses with pools. This is more for wine growers,” she said. The price reduction “is trying to find a sweet spot.”

Kathleen Pender is a San Francisco Chronicle columnist. Email: kpender@sfchronicle.com Twitter: @kathpender

Article source: https://www.sfchronicle.com/business/networth/article/Just-mind-blowing-Despite-fires-and-virus-15576043.php

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