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The housing market forecast for San Francisco suggests that home prices could weaken through 2020 and into 2021. They might even take a downturn. This is largely due to a sharp increase in listings, as sellers begin to outnumber buyers within the city.
Some are suggesting there’s a kind of “exodus” taking place, as COVID-conscious residents leave the crowded city for more suburban housing markets.
It’s too early to declare such a trend, at least from a data standpoint. But there’s no denying the shift that’s taking place within the local real estate market.
Here are the latest trends and forecasts for the San Francisco housing market through 2020 and into 2021.
A Slowdown in the San Francisco Housing Market?
Properties are taking longer to sell in San Francisco, due to a reduction in demand. Home prices are starting to show weakness. And real estate listings appear to be piling up in the city.
Those are the key takeaways from the latest San Francisco housing market forecasts and reports, as of late summer 2020.
Geography note: This story pertains to the city and county of San Francisco, as opposed to the broader S.F. Bay Area. That’s a key distinction, because the city itself is experiencing very different market trends than the rest of the Bay Area. For instance, active real estate listings are way down across most of the Bay Area, while they’ve actually risen within San Francisco County.
Over the past few months, home sales and prices have risen steadily in most parts of the Bay Area. It’s an active time for home buyers. In a sense, the housing market is behaving as if the COVID-19 pandemic never even happened.
According to a recent update from the California Association of Realtors, published earlier this week, the median price for existing homes across the Bay Area rose 18.7% from August 2019 to August 2020. Subregions like Marin and Napa posted gains over 20%.
Bay Area home sales, meanwhile, rose by 10.8% during that same 12-month period. This shows there is still strong demand among buyers, despite COVID-19.
But when you drill down to the San Francisco real estate market in particular, it’s a different story. The median price for existing single-family homes rose by 3.8% year over year, and basically flatlined from July to August of this year. Sales activity remains strong in San Francisco, as of August 2020. But some forecasts predict a slowdown in the months ahead.
Real Estate Listings Way Up in 2020
Here’s the most telling data point from the C.A.R. report mentioned above. Active real estate listings within San Francisco County increased by a whopping 45% over the past year or so.
Most other cities and counties in the region have experienced a sharp decline in the number of active listings.
To quote the September 17 C.A.R. report:
“Forty-nine of the 51 counties reported by C.A.R. experienced year-over-year declines in active listings in August. Merced fell the most with a decline of 70.4 percent from a year ago. San Francisco (45.5%) and San Mateo (2.9%) were the only counties in California with an increase in active listings.”
Similarly, a September 2020 press release from the national real estate brokerage Redfin stated the following:
“Only two of the 85 largest metros tracked by Redfin posted a year-over-year increase in the count of seasonally-adjusted active listings of homes for sale: San Francisco (+75%) and New York City (+10%). The sudden expansion of work-from-home policies due to the pandemic has led many people to flee these cities, two of the country’s most expensive housing markets.”
An August report from Zillow pointed to a “flood of new listings” within the San Francisco housing market.
Granted, this doesn’t necessarily spell doom and gloom for the San Francisco housing market in 2021. But it does suggest that a new trend is taking place, one that could put downward pressure on home prices as we close out 2020 and move into next year.
Demand Shifting from Cities to Suburbs
Real estate listings seem to be piling up within the San Francisco housing market. That might be a minor issue, if home-buyer demand returns to balance things out again.
But some real estate forecasts for San Francisco (and other major cities) suggest that an urban-to-suburban shift could continue through this year and into next. That could boost demand for homes within suburban and rural markets, while reducing demand in the urban centers.
According to a recent statement from Redfin CEO Glenn Kelman:
“Since March 15, searches for homes and towns with population under 50,000 people increased 71% …. more people will leave San Francisco, New York, and even Seattle, some for nearby towns like Sacramento and Tacoma that are close enough to support a weekly office visit…”
Related: Is Sacramento the hot market of 2021?
Negative Home-Price Forecast for San Francisco, Going into 2021
The research team at Zillow recently offered a negative home-price forecast for the San Francisco housing market, going into 2021. They expect prices to dip slightly between now and this month next year.
In mid-September 2020, the group wrote: “San Francisco home values have gone up 3.0% over the past year and Zillow predicts they will fall -2.3% within the next year.”
Zillow also compared the median list price for homes within the city itself and the broader Bay Area. And there’s a stark contrast. In late summer 2020, the median list price in San Francisco was around $1,108 per square foot. That was more than double the median for the broader San Francisco-Oakland-Hayward metropolitan area, which came in at $499 per square foot.
And therein lies the core issue that will affect this real estate market over the next year or two:
If workers no longer have to live in San Francisco for their jobs — if they’re given the freedom to work remotely and live wherever they choose — why would they pay a premium to live in a city where social distancing is a challenge?
Disclaimer: This story includes forecasts for the San Francisco real estate market through 2020 and into 2021. Economic and housing-related predictions are the equivalent of an educated guess and should be treated as such. HBI makes no claims or assertions about future housing trends.