Somehow, Bay Area Home Prices Are Still Breaking Record Prices

You may have heard people are fleeing California — fed up with fires, smoke, and tiny apartments during a pandemic — especially those who can work remotely. But real estate experts agree: The notion of a mass California exodus has been overhyped.

Yes, rents have dropped in pandemic-era San Francisco, but less so in the East Bay and other areas of the region that allow people more space — suggesting most people are moving within the Bay, not out of it. And in terms of home sales, the market remains robust, even reaching new heights. The median price for a single-family home in the Bay Area reached a record high of $1,068,000 in August, up 18.7% over a year earlier. That increase reflects both actual appreciation and a shift toward higher-dollar transactions that skew the median figure.

“I don’t agree with the notion of a mass exodus,” said Noe Valley-based real estate agent Jessica Branson, who previously worked as an editor at CNET. “In San Francisco, there are a lot of smart people who are also at least somewhat hedonists. When they think about what’s next, it’s like: Where else am I going to go?”

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When you look at the actual numbers statewide, there was a slight drop in state population from 39.96 million in July 2019 to 39.78 million in January 2020. California is still the #1 U.S. state in population, 10 million ahead of second-place Texas.

“People around the world are dying to be in California,” Tarek El Moussa of the HGTV real estate show Flip or Flop told me by phone this week. “It’s probably the most popular place on the planet. People all around the world watch TV every day, dreaming of being in Hollywood. Demand is strong for ‘A markets’ like L.A. and San Francisco.”

Business has been good overall, Branson said. The selection for would-be buyers might be somewhat more limited in some parts of town, she said, but she’s also been closing at well over asking price.

“One of my properties went for $700,000 over the list price recently,” she said. “A lot of things have gone crazily over list price.”

Overall, people are moving away from crowded, fashionable neighborhoods like Cow Hollow or Presidio Heights out to the Avenues where they might get a backyard. Think: Inner Sunset, Outer Sunset, Richmond, West Portal.

“There is a migration in San Francisco from east to west,” said Sam Dogen of Financial Samurai. “There’s more space, it’s less dense, and the air is better here.”

There is also movement from the city to the East Bay, where space is greater.

“I sold a property in Kensington that had an incredible view, looking right across the bay at the Golden Gate Bridge right there,” said Bay Area realtor Jim Furlong of Bailey Properties. “Lots of parts of Oakland and Berkeley are beautiful neighborhoods with great transportation to the city.”

People who were previously living in apartments or condos want to live in houses. People in three-bedroom houses want to live in a four-bedroom house if they can. The extra room could be a home office, or a guest room. It’s a natural progression, and often a money-saver.

“We moved out west in the city in 2012 and lowered our cost of living by 40% moving from the Marina to Golden Gate Heights because we didn’t have to work downtown and we wanted an ocean view and more peace and quiet,” Dogen said.

The experts seem to agree that for at least the next several months, through early next year, the market is likely to remain strong. What happens after that will depend on a number of factors, including who wins the November elections, whether the fallout of those elections proves disruptive, and where interest rates are (though the forecast is for continued low rates).

“The market is week by week here, you really have to see what’s happening,” Branson says.

A market correction has to kick in at some point, that much is a given — but even as confident a prognosticator as Tarek El Moussa has given up on trying to predict exactly when the downturn is coming.

“Prices are going to come down [eventually],” he told me. “We’ve been on an appreciating real estate market since 2010 across the board. Whenever a downturn hits, I believe the A markets will get hit harder than the B markets. San Francisco and L.A. will be hit harder.”

El Moussa says he believes the market may not start to settle out until 2022 or beyond, and even then, there are other factors we can’t predict. Global warming clearly has stressed the resources of a state already given to raging wildfires, earthquakes, and other natural disasters. And then there is the ongoing homelessness crisis. For the San Francisco housing market to remain strong for years to come, it’s hardly a reach to suggest that significant progress on social problems will be necessary.

Despite it all, El Moussa points out California remains a dream destination to many people and the allure of California will remain strong, even with the need to address urgent problems.

“The housing market is not going to come tumbling down,” said realtor Jim Furlong, who has sold houses from Berkeley to Monterey. “If anything, our pocket of the world, with Silicon Valley and San Francisco as the high-tech center of the world, will continue to have pressure on the market. And Monterey and Santa Cruz counties are very special areas, a Mediterranean climate, the only beach town in Northern California, you don’t get that anywhere else. People will live in a garage just to stay here — that’s true in San Francisco and it’s true all over the Bay Area. They’re not going anywhere.”

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